What does 'Three Black Crows' mean

Three black crows is a bearish candlestick pattern that is used to predict the reversal of the current uptrend. This pattern consists of three consecutive long-bodied candlesticks that have opened within the real body of the previous candle and closed lower than the previous candle. Oftentimes, traders use this indicator in conjunction with other technical indicators or chart patterns as confirmation of a reversal.

BREAKING DOWN 'Three Black Crows'

The three black crows pattern occurs when bears overtake the bulls during three consecutive trading sessions, where an uptrend is reversed by three bearish long-bodied candlesticks with short shadows. During each session, the bulls open modestly higher than the previous close, but the price is quickly pushed lower and closes near the session low. Traders often interpret that pattern to indicate the start of a bearish downtrend.

Here's what a three black crows pattern looks like:

Three black crows candlestick chart pattern example.

The opposite of the three black crows pattern is the three white soldiers pattern, which occurs at the end of a bearish downtrend and predicts a potential reversal higher. The pattern is characterized by three long-bodied white candlesticks with short, or non-existent, shadows, where the open occurs within the previous candlestick's real body and the close occurs above the previous candlestick's close.

Trading the Three Black Crows

The three black crows pattern should ideally consist of three relatively long bodied bearish candlesticks that close at or near the low price for the period. In other words, the candlesticks should have long real bodies and short, or non-existent, shadows. The pattern is most accurate when the uptrend leading up to the pattern occurred with relatively low volume and the three-day pattern occurred with relatively high volume.

If the three black crows pattern involves a significant move lower, traders should be wary of oversold conditions that could lead to consolidation before a further move lower. The best way to assess the oversold nature of a security is by looking at technical indicators, such as the relative strength index (RSI), where a reading above 70.0 indicates oversold conditions, or the stochastic indicator.

Many traders look at other chart patterns or technical indicators to confirm a breakdown rather than using the three black crows pattern exclusively. For example, a three black crows pattern may involve a breakdown from key support levels, which could independently predict the beginning of an intermediate-term downtrend. The use of additional patterns and indicators increases the likelihood of a successful trade.

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