Up Gap Side-by-Side White Lines

The bullish side-by-side white lines, also known as the up gap side-by-side white lines, is a three-bar bullish continuation Japanese candlestick pattern that is best traded as intended in the stock market and for a quick short in the forex market according to multi-market backtesting spanning decades.

This is one of the few times where the data supports traditional trading methods. 

Keep reading to learn how to identify and optimally trade this three-bar pattern on your candlestick charts.

What Is a Bullish Side-by-Side White Lines Candlestick Pattern?

Up Gap Side-by-Side White Lines Candlestick Pattern Illustration © Analyzing Alpha
Up Gap Side-by-Side White Lines Candlestick Pattern Illustration

The bullish up gap side-by-side white lines is a three-bar bullish continuation pattern.

The up gap side-by-side is easy to identify as it gets its name from the distinct white candles that form a line on a candlestick chart.

Speaking of identification, let’s learn the pattern’s exact requirements, and then we’ll start trading it optimally.

How to Identify the Bullish Side-by-Side White Lines Candlestick Pattern

Bullish Side-by-Side White Lines Candlestick Pattern on the Meta Platforms (META) January 10th, 2019 daily chart
Bullish Side-by-Side White Lines Candlestick Pattern on the Meta Platforms (META) January 10th, 2019 daily chart

A valid bullish side-by-side white lines candlestick pattern requires:

  • A first bullish or bearish candle.
  • The second candle must be bullish and gap higher.
  • The third candle must have a similar size and opening price as the second candle.
  • The up gap side-by-side must occur during an uptrend.

A white lines pattern appeared on Meta’s daily chart on January 10th, 2019.

The price is in a bullish trend as the side-by-side white lines last candle’s close is above the fifty-day moving average. The second bullish candle gaps above the first, followed by a third bullish candle with similar opening and closing prices, fulfilling the up gap side-by-side white lines pattern requirements.

Now that we’ve stenciled this pattern into our minds, what does the data tell us about the best bullish side-by-side trading strategies?

How to Trade the Bullish Side-by-Side White Lines Candlestick Pattern

Data-driven traders should trade the bullish side-by-side white lines using a bullish continuation strategy in the stock and crypto markets, expecting a sizeable move and a bearish mean reversion strategy in the forex market, capturing a quick bounce according to history.

Bullish Side-by-Side White Lines Bullish Reversal Trade Setup

Bullish Side-by-Side White Lines Bullish Reversal Trade Setup on the Enphase Energy (ENPH) July 16th, 2020 daily chart
Bullish Side-by-Side White Lines Bullish Reversal Trade Setup on the Enphase Energy (ENPH) July 16th, 2020 daily chart

The price is in an uptrend as it’s above the fifty-day moving average. There’s a bullish candle, a bullish candle that gaps up, and a third candle that opens and closes roughly around the same price as the previous, fulfilling the bullish side-by-side white lines.

With the pattern identified, traders enter long at a break of the third candle’s high while placing a stop loss below the first candle’s low.

Data-driven traders executing this three-candle up gap on the Enphase Energy (ENPH) on July 16th, 2020, made significant profits.

Forex traders, guided by history, go in the other direction expecting a short-term move.

Bullish Side-by-Side While Lines Bullish Mean Reversion Trade Setup

Bearish Side-by-Side White Lines Bullish Mean Reversion Trade Setup on the Chipolte Mexican Grill (CMG) March 30th, 2020 daily chart
Bearish Side-by-Side White Lines Bullish Mean Reversion Trade Setup on the Chipolte Mexican Grill (CMG) March 30th, 2020 daily chart

Price is in an uptrend as it’s above the fifty-day SMA. We see two bullish candles with similar opening and closing prices, with the first candle gapping up, fulfilling the white lines pattern requirements.

With the white lines pattern identified, smart forex and stock traders enter short when the price crosses above and subsequently below the pattern’s high, setting a stop loss of one ATR.

Let’s use the Tesla (TSLA) chart on March 12th, 2013, to drive this pattern home.

The pattern high occurs on all three candles at $2.63. The price hits $2.63 the next day and quickly reverses. Savvy forex traders enter short and capture significant profits. 

Speaking of trading profits, what does history say about the best bullish side-by-side white lines trading strategy?

Does the Bullish Side-by-Side White Lines Candlestick Pattern Work? (Backtest Results)

Using the following rules, I backtested the bullish side-by-side white lines pattern on the daily timeframe in the crypto, forex, and stock markets.

  • A close above the 50-day SMA constitutes an uptrend.
  • I tested risk-reward ranges from 1 to 5. 
  • The optimal risk-reward ratio is selected using profit per bar.
  • Entry and exits are discussed in the how-to trade section above.
  • Confirmation must occur within three days of the pattern signal.

Similar Candlestick Patterns

Multiple candlestick patterns are often confused with the bullish side-by-side white lines.

Bearish Side-by-Side White Lines vs. Bullish Side-by-Side White Lines

Down Gap Side-by-Side White Lines Candlestick Pattern © Analyzing Alpha
Down Gap Side-by-Side White Lines Candlestick Pattern

The bearish side-by-side white lines, also known as the down gap side-by-side white lines, is a three-candle bearish sibling of its bullish brother. The critical understanding is that these patterns are not mirrored opposites. The difference between the up gap and down gap side-by-side white lines is that the bearish forms in a downtrend and gaps down into two white candles, whereas the bullish occurs in an uptrend with the two white lines gapping up.

Upside Gap Three Methods vs. Up Gap Side-by-Side White Lines

Upside Gap Three Methods Candlestick Pattern Illustration © Analyzing Alpha
Upside Gap Three Methods Candlestick Pattern Illustration

The upside gap three methods is a three-bar bullish continuation pattern. These two patterns are similar in name but differ in identification. The upside gap has a bullish candle, a second bullish candle that gaps up, and a third bearish candle that opens within the previous and closes the gap–much different than the distinct white matching real-bodied candlesticks.

The Bottom Line

The up gap side-by-side is a three-bar bullish continuation candlestick pattern. History shows us that the pattern leads to a bullish move in the stock and crypto markets and short-term volatility in the forex markets.
Data-driven forex and crypto traders desiring statistical significance will want to find more frequent three-candlestick patterns.

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