Sanku (Three Gaps Pattern) Definition and Example

What is Sanku (Three Gaps Model)?

Sanku (three gap pattern) is the Japanese word for a candlestick pattern composed of three people shortcomings situated in a well-defined trend. Candles, with spaces between them, can be consecutive, but they don’t have to be. There may be several candles, then a void, and so on. The appearance of the pattern suggests that a trend could be close to exhaustion and traders should be on the lookout for signs of a reversal.

A Sanku pattern can occur in a downtrend or uptrend.

Key points to remember

  • The Rising Three Gaps pattern occurs during an existing uptrend and forms when there are three higher gaps separated by rising candles.
  • The Falling Three Gaps pattern occurs during an existing downtrend and forms when there are three lower gaps separated by waning candles.
  • Gaps can be separated by multiple candles, not just one.
  • The pattern signals that the trend could be close to exhaustion. The last gap being closed by a move in the opposite direction is a sign of a potential reversal.

What does Sanku (Three Gaps Model) tell you?

The pattern shows very strong price action, but it may not last long. The top three spreads show aggressive buying of the stock. As the number of buyers left to buy begins to dwindle, former buyers turn into sellers looking to take profits and avoid losses.

A Rising Three Gaps pattern must occur within an existing uptrend.

The Sanku pattern warns that things can overheat. This is not the definitive sign of a reversal. For a reversal to occur, there must be an actual price reversal. When the third (highest) gap is filled, some traders consider it a warning that a downward reversal is in progress. Closing the gap, in this case, would be when the price drops below the third gap.

The same concept applies when a three gap pattern occurs in a downtrend. This could indicate that the sellers will soon be exhausted. When the price rises through the third gap, it could indicate that the reversal is in progress.

The pattern is short-term, typically spanning several candles. The model does not necessarily indicate a longer term trend change, although it can sometimes happen when the Sanku takes the form of a Climax up or down.

Examples of using the Sanku (three gaps) pattern

The Sanku pattern is created by a bull candle (high)a higher gap, a bullish candle, a higher gap, a bullish candle, then another higher gap and another candle.

Each of these “candles” can consist of several candles, although in fast-moving markets there are usually only one or two.

Even two gaps with large price movements between them can signal that things are approaching exhaustion.

For traders who are long and want to lock in their profits, the pattern signals them to follow their stop losses. Stop losses can be trailed behind the recent candle low or the most recent gap low, for example. Traders may even wish to follow them behind an intraday assist level.

When the price falls below the most recent gap, it could signal that the tide is changing. The price starts to drop. It can be a temporary pullback or it can indicate a long-term top in the price. What it will be is hard to predict, although the model’s size and euphoria are a good indicator.

The more the price advances in the few days of the pattern, compared to what is normal, the greater the likelihood of a major high which could be followed by a long-term decline in the price. Climax highs are accompanied by very high volumewell above average.

Some traders may initiate short positions once a reversal begins. A stop loss could be placed above the recent candle or above the high of the entire pattern.

Candlestick patterns do not have profit targets. Another exit strategy is needed to lock in profits on trades based on the pattern.

A Sanku pattern has occurred on the Nvidia Corp chart. (NVDA). The price had already risen when the price jumped higher, then hollowed out and rose several times.

The drop in price below the third gap was a sign of trouble for the buyers. He signaled a good exit point on the long side. In this case, a short position could also have been profitable.

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The difference between the Sanku model (three gaps) and three white soldiers

three white soldiers is a reversal pattern that occurs after a downtrend when the price starts rising again. These are three large uptrend candles that show sentiment is moving into the downtrend and a new uptrend may be underway. A downtrend three gap pattern occurs during the downtrend.

Limitations of the Sanku model (three gaps)

Not all Sanku patterns will be followed by a reversal. Consecutive small gaps can occur in uptrends (or downtrends) for long periods of time. Exiting long positions in an uptrend based on such patterns can mean exiting prematurely and leaving a lot of money on the table as the price continues to rise.

Therefore, the interpretation of the three deviation patterns that are important is subjective. The larger the price movements and gaps, the more important this pattern.

The general context and outlook are also important. The Sanku model can only train a minor retreator a complete reversal of the trend could follow.

The model has no profit target. Other means of analysis are needed to determine when to exit trades based on the pattern.

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