Upside/Downside Gap Three Methods

The Upside/Downside Gap Three Methods are a set of technical analysis tools used to identify potential reversals in the trend of a security. The methods are based on the premise that when a security's price breaks through a support or resistance level, it will often continue in that direction.

The first method is the Upside Gap Two Crows. This pattern occurs when a security gaps up on the open, then closes lower than the previous day's close. The next two days, the security closes lower than the open, forming two bearish candles. If the security then closes below the low of the second candle, this is considered a confirmation of the reversal.

The second method is the Downside Gap Two Bulls. This pattern occurs when a security gaps down on the open, then closes higher than the previous day's close. The next two days, the security closes higher than the open, forming two bullish candles. If the security then closes above the high of the second candle, this is considered a confirmation of the reversal.

The third method is the Upside/Downside Gap Three Methods. This pattern occurs when a security gaps up or down on the open, then closes back within the previous day's range. The next day, the security gaps in the opposite direction of the original gap. If the security then closes outside of the previous day's range, this is considered a confirmation of the reversal.

The Upside/Downside Gap Three Methods are a useful tool for technical analysts to identify potential reversals in the trend of a security. However, it is important to remember that these methods are not infallible and should be used in conjunction with other technical indicators and fundamental analysis.