Upside Gap Two Crows

DEFINITION of 'Upside Gap Two Crows'

A bearish market reversal signal in technical analysis. The upside gap two crows pattern is a three-day formation on candlestick charts that typically develops in the following manner:

Day 1 - A bullish day that continues the uptrend, represented by a long white candlestick, which indicates that the closing price of the index or security is well above the opening price.

Day 2 - A bearish day despite the index or security gapping higher at the open, represented by a small black or colored candlestick.

Day 3 - A second bearish day, with the index or security opening higher than the Day 2 open, but closing below the Day 2 close and above the Day 1 close. This is visually represented by a bigger black or colored candlestick that "engulfs" the Day 2 candlestick.

BREAKING DOWN 'Upside Gap Two Crows'

The upside gap two crows is viewed by chartists as a somewhat ominous pattern, since it potentially signals that the index or security may be rolling over as its upward move ends and a downtrend commences. The rationale for this interpretation is that despite two stronger opens (on Days 2 and 3), the bulls have been unable to maintain upward momentum, suggesting that sentiment is turning from bullish to bearish for the index or security.