Three black crows – hopping and skipping into a bearish market

Three black crows are the opposite of three white soldiers that appear at the end of an uptrend. So, when we say the opposite, three black crows pattern usher in the bearish trend in the market.

Like three white soldiers, three black crows also belong to the family of Japanese candlestick charts, which are now widely used by technical traders to understand market movements – predict trend changes and planning market entry or exit positions. The three black crows are formed by three consecutive black candlesticks gradually moving downwards, is a strong indication of a bearish trend reversal.

How To Identify Three Black Crow Candlestick Patterns

Three black crows are a visual pattern. That is, there are no calculations involved in it.

It usually forms during an uptrend, comprises three long-bodied candles, creating a downward movement. Each of these candles opens within the body of the preceding one and closes lower than the previous one. It appears like a staircase in a chart. To traders, it indicates an end of a bullish run and the onset of a downtrend. The candles have long real-body with short or no shadows – hinting that bear forces have successfully pulled the market down and closed near the low. You might spot these candles appearing after a Doji, which indicates market indecision. Traders wait for the formation to complete to take their position.

Key Pointers

  • Three black crows form during an uptrend, often indicate an end of a bull run in the market
  • It is a group of three long-bodied candles with subsequently declining closing price
  • Each candle opens within the body of the previous one, although it is not mandatory
  • It might form near a Doji – a phase of market indecision before the trend reverse
  • The first candle forms during an uptrend and the subsequent two emerge during the downtrend
  • Hinting end of a bullish run, indicating traders to take profit and exit or enter a bullish trade
  • It is the reverse pattern of three white soldiers

Forming A Trading Strategy Around 3 Black Crows

The same caveat applies to 3 black crows as in the case of three white soldiers. It requires confirmation from other technical indicators such as relative strength index (RSI). A well-formed three back crow candlestick pattern is a sign strong enough to indicate a trend reversal, but traders must take into account volume of each session and trend previous to that to place their bids on it. Usually, long bodies indicate that each session sustained for enough time, and bearish trends have kept the market low. Short or no shadow confirms it. And so, traders can plan to exit long and enter short to realise their profit before the market changes. If the candles form with long shadows, it could mean a temporary shift in market sentiment and not an actual trend reversal.

Market movement before the occurrence of three black crow candlestick pattern also bears strong indications. Usually, small bullish patterns emerge in the chart leading to the appearance of long black candles. The short volume of bullish candles signifies that a small group of bullish traders kept the market up before bearish forces took control.

Traders, however, need to confirm trend reversal and eliminate chances of retraction before taking a position in the market. It can easily be a temporary overselling situation or a short phase of consolidation, which traders should be wary of.

Three Black Crows vs Three White Soldiers

The reverse pattern of three black crows is three white soldiers, which appear during a downtrend and indicate a bullish trend reversal. The three white soldiers are also known in different names like three red soldiers or marching soldiers. It is a cluster of three gradually rising long-bodied candles, each closing at a higher price than the previous one. Both three black crows and three white soldiers need confirmation from other marker indicators to confirm a trend change.

Conclusion

Crows are considered ominous, bringing bad news. The chart pattern might have got the name because its formation indicates the end of a bullish trend. It suggests that after a run, the bullish strength is waning, and bearish pull is taking control. However, three black crows, like other candle formations, have its limitations. It can’t be trusted blindly without confirming with other market tools. It can be a period of bearish movement where the market oscillator reaches above 70 signifying a temporary overselling situation.