Three Black Crows is a bearish three-candlestick chart pattern that occurs when price action closes lower than the open and below the previous day’s low for three consecutive days. Traders create this pattern with three long bearish candlesticks that step downward.
Key Characteristics of the “Three Black Crows” Pattern
Each candle in the pattern must open below the previous day’s open, ideally in the middle of that day’s price range. The three candles should all close lower and lower so the last one sets a new short-term low price. This pattern should not have long lower shadows or wicks.
The three black crows pattern can indicate a strong reversal from an uptrend to a downtrend. In extreme cases, it may signal the end of a bull market and the start of a new bear market. In the short term, it can mark the beginning of a downswing in price action.
This pattern also reflects a shift in market sentiment from positive to negative. Steve Nison, who introduced candlesticks to the West, noted that it would likely be useful for longer-term traders.
It’s named “Three Black Crows” because many candlestick programs use solid black candles to represent days when the price closes lower than the previous day. Crows, being black, often have an ominous appearance, especially before they fly down from their perch. The pattern can be black, red, or any color your charting uses.
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Market Implications and Sentiment Shifts
It’s important to consider the chart context when analyzing where a this candle pattern forms. This bearish reversal pattern near a chart top with an overbought reading has more room to drop than if it forms after a long market sell-off in oversold conditions.
The inverse of the bearish three black crows candle pattern is the bullish three white soldiers candle pattern.
