Up Gap Side-By-Side Pattern:  In the world of the stock market, every movement in price is due to a reason and every movement gives an indication. There are few candlestick patterns which when formed give a certain indication of future movement. These candlestick patterns are important tools for technical analysts to predict the future movement of prices. One such pattern is the up gap side-by-side pattern which is a three-candlestick pattern that we will be discussing in detail in this article.

Up Gap Side-By-Side Pattern – Definition

The Up Gap Side-by-Side pattern is a rare, three-candlestick formation that appears during an uptrend.

This pattern is considered a bullish trend continuation pattern, suggesting that the uptrend will likely continue after the pattern has been completed. Traders with existing long positions may want to hold or add to their positions, and traders who missed earlier opportunities can use this pattern to enter the market on the long side

Up Gap Side-By-Side Pattern – Formation

The Up Gap Side-by-Side pattern is a bullish continuation pattern that can appear in the middle of an existing uptrend. This pattern comprises the following candles:

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  1. A large green candle that is a part of the existing uptrend.
  2. The second candle opens at a Gap-up above the close of the first candle.
  3. The third candle opens gap down but manages to close higher than first candle.

This pattern suggests that the buyers anticipate further upward movement in the price and continue buying the security

Up Gap Side-By-Side Pattern – Psychology

In an uptrend, the first candle formed is a green candle due to buyers being in control of the market. The second candle opens with a gap up because of the high buying pressure where buyers are willing to buy the security at higher prices. 

In this candle formation, the buying pressure is so high that the second candle opens with a gap up. The third green candle after a gap down suggests that the bears tried entering the security but were overpowered by the bulls. The formation of the Up Gap Side-by-Side forms a positive outlook and more buyers might see this as a potential buying zone. This is why the price generally moves higher after the formation of a rising window pattern. 

Up Gap Side-By-Side Pattern – Trading Ideas

Before the appearance of this pattern, traders should ensure that the previous trend must be an uptrend. Once this pattern is formed, the following are the trade details- 

  • Entry – After the formation of the candlestick pattern, traders can take a long position at or just above the close price of the third candle.
  • Profit Target – Traders can exit the trade when the price of the security reaches near the immediate resistance zone. One can also book profits in this trade based on risk-to reward ratio especially when the security is making new highs.
  • Stop loss – The stop-loss should be placed below the low of the second and third green candles.

Up Gap Side-By-SideExample

In the above one-day chart of ICICI BANK, we can observe the formation of the up gap side-by-side candlestick pattern in an uptrend. As discussed in the article, the price of the stock saw a bullish movement after the formation of this pattern. We can see that the bullish trend continued and hence, traders could have looked to enter a long position after the formation of this pattern.

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Key Characteristics of Up Gap Side-By-Side White Lines Pattern 

  1. Formation: This pattern consists of three consecutive bullish(green) candlesticks. The second candlestick opens above the close of the first candlestick, creating a gap between the two and the third candle is similar in size to that of the second candle.
  2. Price Action: The opening price of the second candlestick should be higher than the high of the first candlestick, forming an upward gap.
  3. Volume: Ideally, there should be strong volume accompanying the pattern, suggesting conviction among traders.
  4. Continuation Signal: The Up Gap Side-by-Side pattern suggests that the bullish trend is likely to continue, as it demonstrates that buyers are still in control despite the initial gap-up.
  5. Confirmation: The third bullish candlestick acts as a confirmation of the continuation of the uptrend. 

Conclusion

In this article, we discussed one of the less frequently appearing candlestick pattern the up gap side-by-side pattern. Traders should not be taking a trade just based on this pattern but must also use other indicators before taking a trade. We have discussed what an up gap side-by-side pattern is, its meaning, formation, psychology behind its formation, and how to take a trade. It is necessary to place a stop loss as it will minimize the losses in cases where the market moves against our analysis. 

Written by Praneeth Kadagi

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