What Do 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.

Key Takeaways:

  • Three black crows are considered a reliable reversal pattern when confirmed by other technical indicators like the relative strength index (RSI).
  • The size of the three black crows and the shadow can be used to judge whether the reversal is at risk of retracement.
  • The opposite pattern of three black crows, is three white soldiers indicating a reversal of a downtrend.

What Do Three Black Crows Tell You?

Three black crows are a visual pattern, meaning that there is no particular calculations to worry about when identifying this indicator. The three black crows pattern occurs when bears overtake the bulls during three consecutive trading sessions. This will show up on the pricing charts as three bearish long-bodied candlesticks with short shadows.

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

Three black crows candlestick chart pattern example.
A typical three black crows pattern.

In a typical appearance of three black crows, the bulls will start the session with the price opening modestly higher than the previous close, but the price is pushed lower throughout the session. At the end, the price will closes near the session low under pressure from the bears. This trading action will result in a very short or non-existent shadow. Traders often interpret this downward pressure sustained over three sessions to be the start of a bearish downtrend.

Example of How to Use Three Black Crows

As a visual pattern, three black crows are best used as a sign to seek confirmation from other technical indicators. The three black crows pattern and the confidence a trader can put into it depends a lot on how well formed the pattern appears. The three black crows should ideally be 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. If the shadows are stretching out, then it may simply indicate a minor shift in momentum between the bulls and bears prior to the uptrend reasserting itself.

The three black crows pattern becomes a more accurate visual indicator when the uptrend leading up to the pattern occurred with relatively low volume and the three-day pattern occurred with relatively high volume during the sessions creating the three black crows. In this scenario, the uptrend was established by a small group of bulls and then reversed by a larger group of bears. Of course, with markets being what they are, that could also mean a large number of small bullish traders running into a smaller group of large volume bearish trades. The actual number of market participants matters less than the volume each is bringing to the table.

The Difference Between Three Black Crows and Three White Soldiers

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 (again) short, or ideally non-existent, shadows, where the open occurs within the previous candlestick's real body and the close occurs above the previous candlestick's close. Three white soldiers are simply a visual pattern indicating the reversal of a downtrend whereas three black crows indicate the reversal of an uptrend. The same caveats as far as volume and confirmation from other indicators apply to both patterns.

Limitations of Using Three Black Crows

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.

Moreover, many traders typically look at other chart patterns or technical indicators to confirm a breakdown rather than using the three black crows pattern exclusively. As a visual pattern, it is open to some interpretation such as what is an appropriately short shadow, for example. A true three black crows pattern will be mirrored in other indicators. 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 or exit strategy.