Candlesticks are visual bars that represent price action for a given time period on a stock’s price chart. They contain price movement that tells us the opening price, high, low, and closing price of a financial asset. Traders seeking to spot a possible market reversal may look for the Three Black Crows candlestick pattern on their charts which is considered a potentially bearish pattern.
When a combination of candles exists, it illustrates a story or chart pattern for some traders to consider trade entries and exits. These candlestick patterns, though lagging, are a form of technical analysis and allow us to read the atmosphere of the market for a set stock.
Candlestick formations are relied on by all kinds of market participants trading various instruments. Whether you’re trading stocks, their options, forex, crypto, bonds, futures, etc., candlestick patterns are recognized to be a strategic form of analysis.
There are many candlestick chart patterns that traders use for confirmation of price movement, market reversals, and/or trend continuations.
Some see black crows flying in the sky or perched on a tree branch and think of impending doom or even death! The symbolism of crows is often associated with such. The actual spiritual language of the ominous blackbird symbolizes transformation representing change, maybe the end of one thing and the birth of a new beginning.
I know, we are supposed to be talking about trading. Hear me out.
The Three Black Crows pattern is just as it is represented spiritually…it signals transformation, and it predicts the death of an uptrend and birth of a downtrend, it represents change whether a pause and shift in direction or complete market reversal.
If you think of it that way, you will know what the pattern may imply when you see it present itself on a price chart.
Three Black Crows Pattern Defined
Put simply, the Three Black Crows candlestick pattern is a three-bar bearish reversal pattern.
When in an up-trending market, experienced traders know a downtrend can take place at any time. Trend reversals can be spotted using price action, volume, and various candlestick patterns. The elements of a candlestick pattern can repeat in a predictable way making their information reliable. The three black crows candlestick pattern is one of those chart patterns.
The three black crows can be identified visually (no math formulations required) and consist of three bearish, red or black candles, depending on how you set up your candlestick chart for the asset you are trading.
These bars should be relatively long-bodied, down-trending candles, demonstrating strong market participation. Each candle and its price action should signal a clear bearish price movement to the downside.
Black Crows Candlestick Pattern Appearance
The bearish candlestick pattern only appears after a market uptrend. It can appear in any particular stock, its options, the forex market, bonds, etc. Ideally, the candlesticks of the bearish Three Black Crows pattern should have the following characteristics:
First Candlestick:
- A long-bodied bearish candlestick, red or black, forms after an uptrend.
- Small wicks if any.
- Preferably with price opening above the previous green candle and closing lower signaling selling pressure.
Second Candlestick:
- A long-bodied bearish candlestick, red or black.
- Small wicks if any.
- Price opening within the body of the first bearish candlestick and closing below.
Third Candlestick:
- A long-bodied bearish candlestick, red or black.
- Small wicks if any.
- Price direction continues by the opening price being within the body of the second candlestick and closing below.
Effectiveness of the Three Black Crows Pattern
Even though the bearish reversal pattern predicts a possible end to the uptrend and the beginning of a downtrend, it may not be evidence enough to apply to a trade. Professional traders use other technical indicators alongside candlestick pattern analysis. They can be highly effective aids when applied with a good trading strategy.
A trader is looking for long bearish candlestick bodies with short to no wicks. Shadows, another name for wicks, or smaller candlestick bodies can signal a minor shift down in price rather than an actual market reversal. Consecutive bearish candlesticks presenting as the three black crows pattern with longer wicks may indicate weakness and warn a trader of a possible retrace to the upside.
Candlestick patterns act as lagging indicators because they must complete in the time frame of the selected price chart before we can be told their story. For this reason, some traders look for the Three Black Crows pattern on a higher time frame chart to consider it more valid and a stronger signal indicating an actual market reversal rather than a correction. When the long bearish candlesticks appear over the daily consecutive trading sessions, most would acknowledge the trend downward and take advantage of trading with the downtrend.
Important to Note
Volume is important to note when identifying the three black crows bearish reversal candlestick pattern. When the uptrend is losing steam, you will see the buying volume start to also get lower. You will then see volume naturally increase when the sellers enter and the black crow pattern appears.
The opposite pattern to the three black crows would be the three white soldiers, a bullish reversal pattern.
Summary: Three Black Crows Candlestick Pattern
The Three Black Crows pattern is a visual chart pattern used to analyze a market downturn. It can be an effective candlestick pattern to identify a reversal in price when used with other technical indicators. Ideally, a trader wants to see long-bodied bearish candlesticks with little to no wicks and an increase in selling volume to confirm the pattern’s validity.
Trading involves significant risk so take the time to practice identifying candlestick patterns and introducing them to your trading strategies. Get comfortable with the asset you desire to trade and see what patterns tend to work best with the strategy and/or technical indicators you have chosen to use and on what time frames they are most reliable.
A great strategy to consider using with the Three Black Crows candlestick pattern is supply and demand which you can learn from the Maurice Kenny Day Trading Program.
Resources to Check Out
Maurice Kenny has helped over 600 people become financially free through one-on-one coaching, mentorship, and options trading strategy. Many of these new traders are now full-time traders, and they all started by watching his 1-hr webinar.
Feel free to check out other FREE educational resources to help guide you as you begin your new journey to financial freedom.
Also, download a ( FREE E-BOOK ) by Maurice Kenny DAY TRADE LIKE A MILLIONAIRE.
Book: Candlestick Charting for Dummies by Russell Rhoads (new release available June of 2022)
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