This pattern is formed when a series of candlesticks have the following properties –
• Day 1 - The first bar is a white, large one with a defined uptrend
• Day2 - Second bar gaps above the close of the 1st bar
• Day 3 - The third and last bar closes within the gap between the last two bars. However, it doesn’t need to fully close this gap
This is useful in technical analysis where at times traders get ahead of themselves by sending the price higher too quickly and then need to pullback slightly. The third, red candlestick bar that forms the upside of this tasuiki gap signifies the period of consolidation before optimistic analysts send the prices higher.