Bearish Three Gaps Pattern

Candlestick Bearish Three Gaps Pattern
Bullish Reversal Potential - Bearish Exhaustion Signal

Candlestick Patterns

The Bearish Three Gaps pattern is an exhaustion pattern after, in some cases, and entended move. The image shown here is an "ideal" type of illustration. Four black candles with gaps between the range of the candles. Another form would be when you have an extended downtrend (5~100+ bars in a defined down-trend) and you can identify three unique gaps in price action. It does not matter how many bars are inbetween the gaps. All that matters is there are three gaps in a defined trend.

Now, when this happens, you should look for exhaustion of the trend and potential buy/reversal signals. This pattern shows the bearish trend should end soon, thus you need to start looking to the best bullish trend reversals.

If this pattern is found after a nice long extended down trend, then I suggest letting the last price wave settle before trying to "buy right in". Sometimes, the last price wave moves quite a bit after the third gap. It may continue down another 1~3+% before it stops.

This pattern is a setup for an eventual bullish reversal. It is good to use this as a warning that some bullish move should happen in the future - just time it with the other candlesticks and the longer-term charts.

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