How to Profit from the Downside Tasuki Gap Candlestick Pattern

The Downside Tasuki Gap candlestick pattern is a bearish continuation pattern that suggests an existing bearish trend is likely to persist after a brief pause.

Unlike reversal patterns that indicate trend exhaustion, the Downside Tasuki Gap signals that sellers remain in control, even as the price briefly pulls back.

This pattern consists of three candlesticks and appears when the second candle gaps down from the first, followed by a third candle that partially retraces but does not close the gap.

Traders often look for this pattern in strong downtrends to confirm that momentum is intact.

The Downside Tasuki Gap pattern typically forms as follows:

1. First candle – A strong, bearish candle that confirms the ongoing bearish downtrend.
2. Second candle – Another bearish candle that gaps from the first candle’s close, reinforcing selling pressure.
3. Third candle – A bullish candle that moves up but does not fully close the gap between the first two candles.

   The key characteristic of the Downside Tasuki Gap is that the third candle does not fill the gap, which suggests sellers are still in control and the trend continuation is likely.

The Downside Tasuki Gap candle pattern is illustrated below.

• Appears in a downtrend, confirming bearish momentum.
• Three-candlestick structure:
  • • First candle: Strong bearish candle.
    • Second candle: Gaps down and closes lower.
    • Third candle: Moves up slightly but does not close the gap.
• Indicates continuation, as the gap remains unfilled.
• Works best in high-volume, trending markets where price gaps are respected.

The Drawback Tasuki Gap Pattern reflects bearish dominance despite a minor pullback.

1. First candle – Sellers push the price lower, confirming an ongoing bearish downtrend.
2. Second candle – Gaps down, showing that selling pressure remains strong.
3. Third candle – Buyers attempt to recover the gap but fail, reinforcing seller control.

Since the gap remains partially open, it suggests that the downtrend is intact, and market sentiment remains bearish.

Market Conditions

The Downside Tasuki Gap works best in strong downtrends. It signals that temporary buying pressure is absorbed, allowing the bearish trend trading to continue.

Volatility Considerations

• In high volatility markets, the third candle’s pullback may be larger, but the gap must remain partially open to validate the pattern.
• In low volatility markets, the pullback is typically smaller, making the pattern easier to identify.

• Stop loss placement: Above the high of the third candle (or above the first candle’s open for a wider stop).
• Entry strategy: Traders enter after the third candle closes, ensuring the gap remains unfilled.
• Profit targets: These targets can be set at previous support levels or using a risk-reward ratio 2:1.

• The third candle fully closes the gap – This invalidates the pattern and may indicate trend exhaustion.
• Weak volume on the second candle’s gap down – A lack of conviction may lead to a failed continuation.
• Strong buying pressure on the third candle – If the third candle has a large green body, it may indicate a reversal instead of a continuation.

To incorporate the Downside Tasuki Gap into a technical analysis trading strategy, traders should:

1. Identify a strong downtrend before the pattern forms.
2. Confirm the three-candlestick structure, ensuring that the gap remains open.
3. Use volume analysis – Higher volume on the second candle increases the pattern’s reliability.
4. Set stop-losses above the pattern’s high to protect against invalidation.
5. Backtest the pattern across different assets and timeframes before live trading.

Below is a simple Amibroker AFL script to detect the Downside Tasuki Gap pattern:

// Downside Tasuki Gap AFL Code for Amibroker

_SECTION_BEGIN(“Downside Tasuki Gap”);

 FirstBearish = Ref(Close, -2) < Ref(Open, -2);

GapDown = Ref(Open, -1) < Ref(Close, -2);

SecondBearish = Ref(Close, -1) < Ref(Open, -1);

ThirdBullish = Close > Open;

PartialGapFill = Close < Ref(Open, -1) AND Close > Ref(Close, -1);

 DownsideTasukiGap = FirstBearish AND GapDown AND SecondBearish AND ThirdBullish AND PartialGapFill;

 PlotShapes(IIf(DownsideTasukiGap, shapeDownArrow, shapeNone), colorRed, 0, Low);

 _SECTION_END();

This script helps traders detect Downside Tasuki Gap patterns on stock charts.

The Downside Tasuki Gap candlestick pattern is a bearish continuation signal that helps traders stay in downtrends despite minor pullbacks. It consists of three candlesticks, with the second candle gapping down and the third candle retracing slightly without closing the gap.

This pattern offers high-probability trade setups in trending markets when used correctly and confirmed with other trading indicators.

Links to articles about other Candlestick Patterns

1. Doji
2. Hammer
3. Inverted Hammer
4. Bullish Engulfing
5. Bearish Engulfing
6. Morning Star
7. Evening Star
8. Shooting Star
9. Hanging Man
10. Piercing Pattern
11. Dark Cloud Cover
12. Three White Soldiers
13. Three Black Crows
14. Dragonfly Doji
15. Gravestone Doji
16. Spinning Top
17. Marubozu
18. Tweezer Top
19. Tweezer Bottom
20. Bullish Harami 
21. Bearish Harami
22. Rising Three Methods
23. Falling Three Methods
24. Bullish Abandoned Baby 
25. Bearish Abandoned Baby 
26. Bullish Kicker 
27. Bearish Kicker
28. Three Inside Up
29. Three Inside Down
30. Upside Gap Two Crows
31. Mat Hold
32. Upside Tasuki Gap
33. Downside Tasuki Gap