What Is the Up/Down Gap Side-by-Side White Lines Pattern?
The side-by-side white lines pattern is a three-candle continuation pattern that occurs on candlestick charts. The up version is a large up (white or green) candle followed by a gap and then two more white candles of similar size to each other. The down version is a large down (black or red) candle followed by two white candles of similar size. When the pattern occurs, which is rare, it is expected that the price will continue moving in the current trend direction, down or up, as the case may be.
- There is an up and down version of the pattern. The up version is a white candle followed by a gap up and two white candles of similar size. The down version is a black candle followed by a gap down and two white candles of similar size.
- The pattern is a continuation pattern, meaning the price is expected to move in the direction of the trend (first candle) following the pattern.
- The pattern has moderate reliability in terms of the trend continuing after the pattern, but quite often the price move after the pattern will be muted, indicating it is not a highly significant pattern.
Understanding the Up/Down Gap Side-by-Side White Pattern
The up gap side-by-side white lines is a bullish continuation pattern with the following characteristics:
- The market is in an uptrend.
- The first candle is a white candle.
- The second candle opens above the close of the first candle (gap up).
- The third candle has a real body with the same length as the second candle with an open that's at the same level or higher than the real body of the first candle.
The down gap side-by-side white lines is a bearish continuation pattern with the following characteristics:
- The market is in a downtrend.
- The first candle is a black candle.
- The second candle is a white candle that opens below the close of the first candle (gap down).
- The third candle is a white candle with a real body that's the same length as the second candle and opens at the same level or lower than the real body of the first candle.
The side-by-side white lines pattern is moderately accurate in predicting a continuation of the current trend, but it is somewhat uncommon. A continuation occurs 66% of the time. The pattern doesn't always produce large price moves. A little over 60% of the patterns produced a 6% average move in 10 days, and those patterns occurred in downtrends with a downside breakout from the pattern (downtrend continuation). Patterns occurring in other contexts didn't have as large of price moves, according to Thomas Bulkowski's candlestick research.
Use other chart patterns or technical indicators to confirm the candlestick pattern to maximize the odds of success.
Many traders opt to wait for confirmation from the pattern. Confirmation is price movement that confirms the expectation of the pattern. For example, following an up gap side-by-side white lines pattern, a trader may wait for the price to move above the highs of the pattern before initiating a long position. A stop loss could then be placed below the low of the second or third candle or even the first candle in order to give the trade more room.
Up Gap Side-By-Side White Lines Psychology
Suppose the security is engaged in an uptrend, with confident bulls expecting higher prices. The first candle shows a rally with a large real body and a close higher than the open. Bull confidence increases further on the second candle, with an up gap and positive intraday price action that holds a higher high into the closing bell.
Bullish resolve is tested on the third candle, which opens with an initial drop into the opening price of the second candle. However, the decline fails to gain traction and buyers lift the security back to the high of the second candle by the close. This reveals diminishing bear power, raising odds for a rally and new high on the next candle.
Down Gap Side-By-Side White Lines Psychology
Suppose the security is engaged in a downtrend, with confident bears expecting lower prices. The first candle posts a sell-off bar with a large real body and a close lower than the open. Bear confidence is shaken on the second candle, with a down gap and strong intraday price action that holds below the gap into the closing bell. Bearish resolve grows on the third candle, which opens with a down gap into the opening price of the second candle. Once again strong intraday price action fails to pierce gap resistance. This reveals diminishing bull power, raising odds for a decline and new low on the next candle.
Example of the Up Gap Side-By-Side White Lines
The Apple Inc. (AAPL) daily chart shows an example of the up gap version of the candlestick pattern.
Coming off a swing low, the price has a large up candle followed by a gap and then two additional side-by-side up candles. The next day (fourth candle), the price continued to rally, moving above the high of candles two and three. This provided confirmation that the uptrend was continuing. The rally lasted a few more days before drifting sideways.
Difference Between the Up/Down Gap Side-By-Side White Lines and Three Outside Up/Down
The three outside up/down candlestick pattern is a reversal pattern, not a continuation pattern like the up/down gap side-by-side white lines pattern. In the outside up pattern, a black candlestick is followed by two white candles. In the outside down pattern, a white candle is followed by two black candles.
Limitations of the Up/Down Gap Side By Side White Lines
The pattern is rare, which means finding it and opportunities to use it will be limited. The pattern has moderate reliability. This means that ideally the candlestick pattern should be coupled with other forms of analysis and confirmed by other trade signals. The pattern that tended to produce large price moves, following the pattern, was the down gap version occurring in a downtrend. The pattern served to act as a downtrend continuation pattern.
This pattern, and candlestick patterns in general, don't provide a price target. It is up to the trader to determine when they will exit a profitable trade. Waiting for price confirmation following the pattern is recommended.