Three black crows pattern is a reversal pattern forming at the top of an uptrend. It signals a bearish reversal and alerts the traders to get out of the market. The three black crows have three red candles, all long and bearish. It pictures heavy selling pressure in the market and is a great technical indicator to open a short position.
The three black crows pattern describes an incoming market downturn. All the candles on the stock or Bitcoin chart are long and of almost the same size. Each candle must open below the previous day open, to picture a successive bearish reversal.
Three black crows chart pattern is a frequent occurrence in several stocks or Cryptocurrency market. The candles suggest aggressive moves by the market bears to push the prices down. It highlights the exhaustion of bulls in the market and oscillators indicators at this point usually presents a negative picture.
All the three black crows candlestick must have a long body and should be of roughly the same size. In addition, the perfect formation of the three black crows resembles a staircase formation on the chart.
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Keynotes on the Three Black Crows Pattern
- Three black crows are reliable reversal pattern when used in conjunction with other technical indicators such as Relative Strength Index (RSI) or Moving Average (MA)
- They are the opposite of three white soldier pattern, which is a bullish reversal pattern
- The size of the candlesticks are helpful to judge whether the reversal is on a risk of failure
How the Three Black Crows Pattern comes into formation?
The formation comes into effect after an uptrend. The price must constantly make an upward move before the occurrence. When the market is at the peak, the forex or Bitcoin traders expect a change in a trend, either because of technical indicators or psychological reasons.
As price reaches new highs, the buyers exit the market sending price to the previous low. For the formation to be effective, there must be long bearish candles appearing after the uptrend, each opening below the previous one. The candlestick should have a large body and the bigger they are, the higher are the success rate of the reversal.
The formation in practice
Three black crows candlestick is a usual occurrence on forex or Bitcoin charts after an uptrend. The Bitcoin-to-Dollar chart below shows the formation in practice and highlights how the pattern alarms the traders for an incoming bearish reversal.
Three black crows pattern appears at the end of a bull run. It can appear on a daily, hourly or weekly chart and its intensity depends on the timeframe it occurred. However, the traders should also use oscillators to determine the reversal, as sometimes, the bearish candle might get overstretched sending the price to oversold territory and invalidating the formation.