Three black crows is a bearish three candlestick chart pattern formed by price action closing lower than the open and below the previous day’s low for three days in row. It is created by three long bearish candlesticks that stair step downward. Each candle in the pattern must open below the last days open, in the middle of the previous price range of the last day is ideal. 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 signal a strong price action reversal from an uptrend to a downtrend on a chart. In extreme examples it can signal the end of a bull market and the beginning of a new bear market. In the short-term it can signal the beginning of a down swing in price action.
The three black crows can signal a change in market sentiment from positive to negative. The author that introduced candlesticks to the west Steve Nison wrote: “The three black crows would likely be useful for longer-term traders.”
It is named three black crows for the fact that many candlestick programs use solid black candles when price closes lower than the previous day and that crows are black and have an ominous look about them at times before they fly down from their perch. The three crows’ pattern can be black, red, or whatever color your candle charting uses.
It is important to take chart context into account for where a three black crows candle pattern is formed. This bearish reversal pattern near a chart pattern top with an overbought technical reading will have more room to go lower than if this candle pattern forms at the end of 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.