The upside gap two crows is a three-day pattern that is created between a long white or green candle at the top of an uptrend and a small black or red candle on the second day. The black or red candle gaps open and it pulls back before the end of the day. Even though it has pulled back it did not fill the gap. The third day opens above where the first black or red candle opened. It cannot hold at these levels so it pulls back before the end of the day. It engulfs the small black or red candle’s body and closes lower than the previous day. It is important to note, however, that it still did not close the gap from the white or green candle.
Criteria for Upside Gap Two Crows:
- A long white candle continues the uptrend.
- The real body of the following day is black or red while gapping up but not filling the gap.
- The third day opens higher than the second day open and closes below the second day close. This produces a black or red candle that completely engulfs another small black or red candle.
- The close of the third day is still above the close of the last white or green candle.
Pattern Psychology for The Upside Gap Two Crows Pattern:
The atmosphere is bullish after a strong uptrend has been in effect. The price gaps open but it cannot hold the gains. Before the end of the day the bears step in and take the price back down, however the gap up from the white or green candle was not filled. The following day the bulls try again but they open the price higher than the open of the previous day. Again, they cannot hold the price up and so it backs off and closes lower than the previous day. This has now taken all of the steam out of the bulls. At this point, you want to see the bears really stepping in the following day to confirm the reversal. Please note that the upside gap two crows is not as bearish as the two crows pattern.
Candlestick signals identify where money is flowing in and out of stocks/sectors. Being able to identify and understand the investor psychology that creates the candlestick signals produces a huge advantage. It allows an investor to participate in stock investments that have an extremely high probability of moving in the right direction.
Candlestick patterns are created by common sense investment practices. Please continue to learn about the additional secondary candlestick signals.