Sanku (Three Gaps pattern) is the Japanese word for a candlestick pattern that consists of three individual gaps located within a well-defined trend. After the appearance of the third gap, the pattern is used to suggest an impending reversal in the direction of the current trend.
The Sanku or Three Gaps pattern is used by traders to predict situations of exhaustion and change in a trend. Ultimately, the current trend is said to be reversed when the price of the asset fills the third gap. Technical traders should not rely solely on the three gaps pattern to predict a reversal; rather, they should combine this technique with other technical indicators.
Knowing when to hold or when to trade is an exceptionally difficult and complicated skill to learn, but mathematics can help by providing informed choices through patterns. When you follow the Sanku pattern, you are betting on the same side of mathematics that a price will dramatically change by the time your asset is nearing its third gap.
The Sanku pattern indicates an exhaustion pattern that happens three times. A Sanku pattern can either be an upward or downward trend.
The three gaps up pattern plays out over four or more days, and the signal is quite unique in its flexibility, as the three gaps do not need to be consecutive. To identify a up pattern, look for the following criteria:
First, a well-defined upward trend must be in progress. Nexr, there must be three gaps (hence the name) within the uptrend. A gap is an unfilled space or interval between the bodies of two candlesticks, and it indicates that no trading has occurred during that window of time. There's also the three gaps down pattern, which moves opposite to three gaps up.
During a Sanku pattern, the prevailing trend, either bull or bear, is in control for three days, and the price flies upward or downward, gapping between sessions. As the market becomes overbought or oversold, exhaustion is inevitable. After all that movement, the market will likely reverse, allowing the opposite force to take the reins. Thus, when you have spotted all three gaps, you can safely assume that a reversal is on the horizon.
To improve the three gaps up pattern’s reliability, it should be used in conjunction with other technical indicators that point to the same conclusion. By corroborating predictive patterns, a trader can better manage their risk.