Three Black Crows

What Are the Three Black Crows?

Three black crows is a phrase used to portray a bearish candlestick pattern that might predict the reversal of an uptrend. Candlestick charts show the day's opening, high, low, and closing prices for a specific security. For stocks moving higher, the candlestick is white or green. While moving lower, they are black or red.

The black crow pattern comprises of three sequential long-bodied candlesticks that have opened inside the real body of the previous candle and closed lower than the previous candle. Frequently, traders utilize this indicator related to other technical indicators or chart patterns as confirmation of a reversal.

Three Black Crows Explained

Three black crows are a visual pattern, meaning that there are no specific computations to worry about while distinguishing this indicator. The three black crows pattern happens when bears surpass the bulls during three sequential trading sessions. The pattern shows on the pricing charts as three bearish long-bodied candlesticks with short or no shadows or wicks.

In an ordinary appearance of three black crows, the bulls will begin the session with the price opening humbly higher than the previous close, yet the price is pushed lower all through the session. Eventually, the price will close approach the session low under tension from the bears.

This trading action will bring about an extremely short or nonexistent shadow. Traders frequently decipher this descending pressure supported more than three sessions to be the beginning of a bearish downtrend.

Illustration of How to Use Three Black Crows

As a visual pattern, it's best to involve three black crows as a sign to look for confirmation from other technical indicators. The three black crows pattern and the confidence a trader can put into it relies on how very much framed the pattern shows up.

The three black crows ought to in a perfect world be relatively long-bodied bearish candlesticks that close at or close to the low price for the period. As such, the candlesticks ought to have long, real bodies and short, or nonexistent, shadows. In the event that the shadows are loosening up, it might just demonstrate a minor shift in momentum between the bulls and bears before the uptrend reasserts itself.

Volume can make the three black crows pattern more accurate. Volume during the uptrend leading up to the pattern is relatively low, while the three-day black crow pattern accompanies relatively high volume during the sessions. In this scenario, the uptrend was laid out by a small group of bulls and afterward switched by a larger group of bears.

Of course, with markets being what they are that could likewise mean a large number of small bullish traders running into a smaller group of large volume bearish trades. The genuine number of market participants matters not exactly the volume each is offering that might be of some value.

Three Black Crows versus Three White Soldiers

Something contrary to the three black crows pattern is the three white soldiers pattern, which happens toward the finish of a bearish downtrend and predicts a potential reversal higher. This pattern shows up as three long-bodied white candlesticks with short, or preferably nonexistent, shadows. The open happens inside the previous candlestick's real body, and the close happens over the previous candlestick's close.

Three white soldiers are essentially a visual pattern demonstrating the reversal of a downtrend though three black crows show the reversal of an uptrend. Similar provisos apply to the two patterns with respect to volume and confirmation from different indicators.

Limitations of Using Three Black Crows

In the event that the three black crows pattern includes a huge move lower, traders ought to be careful about oversold conditions that could lead to consolidation before a further move lower. The best method for evaluating the oversold idea of a stock or other asset is by taking a gander at technical indicators, for example, the relative strength index (RSI), where a perusing below 30.0 demonstrates oversold conditions, or the stochastic oscillator indicator that shows the momentum of movement.

Numerous traders normally take a gander at other chart patterns or technical indicators to affirm a breakdown, as opposed to utilizing the three black crows pattern only. As a visual pattern, it is available to some interpretation, for example, what is a fittingly short shadow.

Likewise, different indicators will mirror a true three black crows pattern. For instance, a three black crows pattern might include a breakdown from key support levels, which could freely predict the beginning of a middle term downtrend. The utilization of extra patterns and indicators improves the probability of an effective trade or exit strategy.

Real-World Example of Three Black Crows

In the third seven day stretch of May 2018, a three black crows pattern appeared on the [GBP/USD](/gbp-usd-english pound-us-dollar-currency-pair) week after week price chart, addressing an unpropitious sign for the currency matching. Analysts hypothesized that the three black crows pattern indicated that the matching would keep on trending low. Three factors were investigated to establish that the three black crows pattern flagged a continuing downturn:

1. The relatively steep vertical trend of the bullish market
2. The low wicks of each candle, demonstrating a small difference between the close and the week's low
3. The way that, while the candles didn't continuously elongate, the longest candle was the third day

Highlights

• The size of the three black crows candles and the shadow can be utilized to judge whether the reversal is at risk of a retracement.
• Three black crows is a bearish candlestick pattern used to predict the reversal of a current uptrend.
• Traders use it alongside other technical indicators, for example, the relative strength index (RSI).
• The contrary pattern of three black crows is three white soldiers, which shows a reversal of a downtrend.