What Is a Three Black Crows Pattern?
The Three Black Crows indicates a bearish candlestick pattern that predicts the reversal of an uptrend. It consists of three consecutive long-bodied red candlesticks that appears when bears overtake the bulls.
The opposite pattern of the three black crows is called the three white soldiers, represented by three consecutive green candlesticks that occur at the bottom of a downtrend.
Example of Three Black Crows
What Does the Three Black Crows Signal?
The Three Black Crows pattern signals that there is already a steady increase in selling pressure following an uptrend. It unfolds across three candles and represents a strong price reversal from a bull market to a bear market. The three black crows help to confirm that a bull market has ended and the market sentiment has turned bearish.
Trading a Three Black Crows Pattern
Looking at the chart of Bitcoin on the 1-hour time frame, it’s pretty evident that there are a lot of three black crows candlestick patterns. I pointed out five sets of these candlestick patterns that appear on the local high right before the dump down over $2000 on Spot. When you start to see multiples of the three black crows, tread with caution as this candlestick pattern indicates a potential top and bears are about to dump on the market.
Looking at the chart of Apple on the 4-hour time frame we can see multiple sets of three black crows. Right after the pump up to $130 (post-split price), there were three sets of three black crows patterns that indicated a reversal in the trend of the market. Instead of breaking out of this downtrend and continuing up after the split, the split date marked the highest price to date of Apple and along with the three black crows reversal pattern, the stock dropped all the way to $104.
Differences Between the Three Black Crows and Three White Soldiers
The Three Black Crows and Three White Soldiers candlestick pattern are the exact opposite of each other. The Three Black Crows consist of three consistent red candles in the market, while the three white soldiers pattern consists of three consistent green candles in the market. The Three Black crows signals the bears overtaking the bulls, while the Three White Soldiers signals the bulls overtaking the bears. Think of the black crows as being bearish and the white soldiers painting a bullish momentum.
Limitations of the Three Black Crows
The Three Black Crows candlestick pattern doesn’t necessarily paint a bearish picture. This pattern can very well paint a rising three methods pattern where the three black crows, three consistent red candles, actually are in the middle of painting bullish momentum moving up. When trading this pattern, look to see if this pattern shows up at the top of the bullish momentum or at the start of the bullish momentum. This makes a huge difference and definitely is a limitation to this pattern if its found at the start or bottom of the bullish momentum.