Direct Answer
Upside Gap Three Methods is a three-candle pattern that occurs during an established uptrend. It's classified as a continuation pattern rather than a reversal pattern, its role is to describe a brief pullback inside a move that's expected to keep going, not to flag a change in direction.
Key Takeaways
- Upside Gap Three Methods is a three-bar bullish continuation pattern that forms during an existing uptrend, not a reversal signal.
- The first two bars are both long bullish candles with a gap up between them, showing strong buying pressure.
- The third bar is a bearish candle that opens within the second bar's body and pulls back to fully close the gap, filling back into the first bar's range.
- The pullback is read as temporary, once the gap is filled, the prevailing uptrend is expected to resume.
- The pattern is easy to confuse with Upside Tasuki Gap, which looks similar but only partially fills the gap.
Upside Gap Three Methods Candlestick Pattern: Formation, Meaning, and Signals
Upside Gap Three Methods is a three-bar bullish continuation pattern that appears within an uptrend: two long bullish candles gap up, then a bearish third bar pulls back to close that gap. Because the pattern forms mid-trend rather than at a turning point, it signals a pause in the uptrend rather than a reversal of it.
What Is Upside Gap Three Methods?
Upside Gap Three Methods is a three-candle pattern that occurs during an established uptrend. It's classified as a continuation pattern rather than a reversal pattern, its role is to describe a brief pullback inside a move that's expected to keep going, not to flag a change in direction.
The pattern's defining feature is the gap between its first two bars and what the third bar does to it: rather than continuing to push price higher, the third bar reverses just far enough to fill that gap back into the first candle's range, then the uptrend is expected to resume from there.
How Upside Gap Three Methods Forms
The pattern forms across three bars. The first bar is a long bullish candle within an uptrend. The second bar is also a long bullish candle, but it gaps up from the first, its low opens above the first bar's high, leaving a visible gap on the chart. Together, these two bars show sustained buying pressure with no overlap between them.
The third bar is a bearish candle that opens within the second bar's body and sells off from there, pulling price back down to close the gap, its close lands back inside the first bar's range. Because the third bar fully fills the gap rather than merely dipping into it, the pattern reads as a temporary pullback rather than a break of the prevailing trend.
Upside Gap Three Methods Example
The chart below shows a deterministic, illustrative example: an uptrend leading in, the two gapped-up bullish bars, then a bearish third bar that closes the gap, followed by two possible continuations, a confirmation (price closes back above the first bar's low and the uptrend resumes) and a failure/look-alike (the pullback keeps going instead). Toggle between them to see why the third bar alone doesn't decide the outcome.
How to Trade Upside Gap Three Methods
Read it as continuation, not reversal
Because this is a continuation pattern, the implication is that after the third bar's brief pullback fills the gap, the prevailing uptrend is expected to resume, not that the trend has turned. Treating the bearish third bar as a standalone reversal signal misreads the pattern.
Wait for confirmation
Confirmation would be the next bar closing back above the first bar's low. Until that happens, the pullback filling the gap is only a tentative continuation read, not a confirmed one.
Know what breaks the pattern
If the following bar instead closes below the first bar's low, the expected continuation hasn't confirmed, and the setup should be reassessed rather than assumed to still be intact.
Common Upside Gap Three Methods Mistakes
- Reading the third bar in isolation, treating the bearish third candle as a reversal signal rather than recognizing the full three-bar continuation pattern it's part of.
- Confusing gap-filling with gap-continuing, a bar that stays within the gap without fully closing it is Upside Tasuki Gap, a different pattern, not Upside Gap Three Methods.
- Skipping the confirmation bar, acting on the pattern before the next bar closes back above the first bar's low skips the step that separates a real continuation from a failed one.
- Ignoring the prior trend, the pattern only makes sense as a continuation if it forms within an actual uptrend, not in a sideways or declining market.
Upside Gap Three Methods vs. Similar Patterns
| Pattern | Gap involved | Key difference |
|---|---|---|
| Upside Gap Three Methods | Yes | Baseline, third bar fully closes/fills the gap |
| Upside Tasuki Gap | Yes | Third bar only partially fills the gap, leaving it partly open |
| Rising Three Methods | No | No gap involved, three small bearish candles pause within a large first candle's range |
Limitations of the Upside Gap Three Methods Pattern
Upside Gap Three Methods describes a specific three-bar sequence, not a forecast. It doesn't tell a trader how large the resumed uptrend move will be, how long the pullback will last before the next bar confirms, or why the gap formed in the first place, the same shape can appear around routine buying pressure or around a scheduled catalyst, and the pattern itself doesn't distinguish between them. Like any multi-bar pattern, it works best combined with trend context and a defined confirmation and invalidation plan, not used alone.
The One Where the Gap Does Fill
This is the pattern most easily confused with the upside tasuki gap, and the difference is a single condition running the opposite way. Here the third bar pulls back and fully closes the gap, returning into the first bar range, and the pattern still claims continuation. In the tasuki version the gap explicitly stays partly open. Same first two bars, opposite third-bar requirement, and different names.
Knowing which you are looking at requires marking the gap boundaries and checking whether the third bar covered the whole void. That is a measurement rather than an impression, and getting it wrong means applying one pattern reading to another pattern.
It is also worth registering that this is a strong claim. Asserting that an uptrend remains intact after a full gap fill asks a lot of the two preceding bars, and confirmation from what follows carries more weight here than in patterns where the pullback was shallower.
An established uptrend is required, and the gap requirement makes the pattern uncommon in markets without session boundaries.
Upside Gap Three Methods FAQs
Is Upside Gap Three Methods a reversal or a continuation pattern?
It's a continuation pattern. It forms during an existing uptrend and signals a brief pullback, not a change in trend direction, the third bar's pullback is expected to be temporary before the uptrend resumes.
What makes the gap in this pattern important?
The gap between the first two bullish candles reflects strong buying pressure. The third bar closing that gap shows a pause, not a reversal of that pressure, the pattern's bullish reading depends on the gap being filled rather than broken through further.
What's the difference between Upside Gap Three Methods and Upside Tasuki Gap?
Both start with two gapped-up bullish candles. In Upside Gap Three Methods, the third bar fully closes the gap. In Upside Tasuki Gap, the third bar only partially fills the gap, leaving part of it still open.
Does Upside Gap Three Methods need confirmation?
Yes. Because the third bar is itself a bearish candle, traders typically wait for the next bar to close back above the first bar's low before treating the continuation as confirmed.
How is Upside Gap Three Methods different from Rising Three Methods?
Rising Three Methods involves no gap, three small bearish candles pause within the range of a large first candle. Upside Gap Three Methods specifically involves a gap between the first two candles that the third bar closes.
Where must the third candle open?
Inside the body of the second candle, so the pullback begins from within the advance rather than gapping away from it. That condition is what makes the third bar a retracement into the gap rather than a separate move. Implementations that only require the third candle to be bearish will admit sequences where the pullback started from an unrelated level.
What does the pattern assume about the gap?
That it acts as support, which is the entire basis of the continuation reading. The third candle falls into the gap and stops within it, and that failure to close it is treated as evidence the level held. Whether gaps generally act as support is a separate question the pattern takes for granted rather than establishes.
Does the pattern need a fourth bar?
Not to be complete, since the three bars satisfy the definition on their own. Practitioners frequently wait for a fourth bar closing above the second candle high before treating the continuation as confirmed. That is an added requirement rather than part of the pattern, and it changes both the timing and the number of instances acted upon.
What if the gap is very small?
The pattern becomes close to meaningless, because a one-tick gap gives the third candle almost no space to fall into and the distinction between filling and not filling it collapses. A size threshold on the gap is a necessary practical addition, and without one the pattern fires on sequences where the supposed support was a rounding difference.
References
- CMT Association: Technical Analysis Body of Knowledge and Research
- CFA Institute Research and Policy Center: Investment Research
- Steve Nison, Japanese Candlestick Charting Techniques (1991), the book credited with popularizing Japanese candlestick analysis in Western markets.
- SEC Investor.gov: Introduction to Investing