Two Crows Pattern
The Two Crows Pattern is a three-day top reversal pattern. The two crows pattern is a gap pattern just like the upside gap. This pattern is created between the long white or green candle at the top of an uptrend, and the small black or red candle on the second day. The black candles gaps open and pulls back before the end of the day, but even though it has pulled back, it did not fill the gap. The third day opens in the body of the small black or red candle. The Bears maintain control and move it lower as they are able to fill the gap and close the price within the white or green candle body. Since the gap is filled so quickly, it eliminates any expectations from the bulls.
Criteria
- A long white or green candle continues the uptrend.
- The real body of the following day is black or red while gapping up and not filling the gap.
- The third day opens within the second day’s body and closes within the white or green candle’s body. This produces a black or red candle that fills in the gap.
Signal Enhancements
If the third day closes more than halfway down the white or green candle, it would form an Evening Star Pattern.
Pattern Psychology
The atmosphere is bullish after a strong uptrend was in effect. The price gap opens but cannot hold the gains. Before the end of the trading day the bears step in and take the price back down. The gap up from the white or green candle was not filled however, and the following day the price opens slightly higher within the body of the previous black or red candle. The bulls are not as boisterous and cannot keep the momentum going. Prices go lower and close in the white or green candle range. The gap up from the bullish exuberance of the previous day is very quickly wiped away. Again, the further the third day closes into the white or green candle body the more bearish the implications are.
Please continue to learn how to identify the different candlestick patterns as well as what the patterns indicate is occurring in the markets.
