Japanese candlesticks - Gaps
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Bullish gap
Definition: A bullish gap is defined as a Japanese candlestick with an opening price higher than the closing price of the previous candlestick. It generally occurs in a bullish trend.
Illustration:
Characteristic: A bullish gap often forms after a significant increase characterized by several large green Japanese candlesticks.
Significance: A bullish gap is a continuation pattern, it indicates a continuation of the bullish movement.
Note: A bullish gap can occur in a bearish trend. This often follows unexpected news from investors. In this case, the bullish gap is less relevant than in a bullish trend. However, this may be a breakthrough gap indicating a trend reversal.
Invalidation: If the lowest point of the candlestick after the gap surmounts the next candlestick, the structure can be considered invalidated.
Bearish gap
Definition: A bearish gap is defined as a Japanese candlestick with an opening price lower than the closing price of the previous candlestick. It generally occurs in a bearish trend.
Illustration:
Characteristic: A bearish gap often forms after a significant decline characterized by several large red Japanese candlesticks.
Significance: A bearish gap is a continuation pattern, it indicates a continuation of the bearish movement.
Note: A bearish gap can occur in a bullish trend. This often follows unexpected news from investors. In this case, the bearish gap is less relevant than in a bearish trend. However, this may be a breakthrough gap indicating a trend reversal.
Invalidation: If the highest point of the candlestick following the gap surmounts the next candlestick, the structure can be considered invalidated.
