The Three Black Crows pattern is a bearish reversal pattern that consists of three consecutive bearish long candlesticks that trend downward like a staircase.
The candlestick pattern that requires that each of the three candlesticks should be relatively long bearish candlesticks with each candlestick opening lower than the previous candle’s open.
This is a trend reversal pattern that should only be considered when it appears in an established uptrend.
The Three Black Crows usually indicate a weakness in an established uptrend and the potential emergence of a downtrend.
In the book, Japanese Candlestick Charting Techniques, author Steve Nison says “The three black crows would likely be useful for longer-term traders.”
Recognition Criteria
To identify the Three Black Crows pattern, look for the following criteria:
- There should be a prevailing uptrend in progress.
- There must be three long and bearish candlesticks in a row.
- Each of those candles must open below the previous day’s open.
- Ideally, it will open in the middle price range of the previous day
- Each candle must close progressively downward, establishing a new short-term low.
- The candles have very small (or nonexistent) lower wicks.
Meaning
The bulls have been winning but now the bears are pushing the price downward.
For three straight sessions, the bears march down those steps, signaling a trend reversal.
The continual downward movement signifies the strength of the bears.
The negative market sentiment is pushing the price downward, and this strong reversal confirms that the uptrend has ended.
Trading Tips
Pay attention to the length of the candlesticks.
The second and third candles must be approximately the same size, to confirm that the bears are firmly in control.
If the third candle is clearly smaller than the others, this indicates weakness and the pattern is not as reliable.
Three Black Crows candlestick pattern has an opposite known as the Three White Soldiers, which is a bullish reversal pattern.