How to Identify & Trade Three Black Crows Patterns

  • May 23, 2018

Watch our video on how to identify and trade three black crows patterns.

What Is a Three Black Crows Pattern & How to Identify These Patterns?

  • Three black crows patterns are made up of all bearish candlesticks. Each bearish candlestick has a close that is lower than its opening price and closes below the previous candle. They are typically either red or black on a chart.

They are three candlestick patterns found on stock charts. This pattern is considered to be a bearish reversal pattern. Watch our video above to lean more. 

They are like taking steps down. Which is essentially what price is doing. Trading is a battle between buyers and sellers.

If you're a trader that longs everything then seeing three black crows patterns aren't going to make you happy. It's time to give way to the other side. Each and every chart pattern is formed because of the battle.

Emotions have moved markets for centuries. Japanese rice trader Homma saw that even in the 17th century. Because of him we have the candlesticks patterns that we trade. Moreover this is how we how we gauge the feelings of people we've never met when trading stocks.

1. Basics of Three Black Crows Patterns

Three black crows patterns are made up of three long bearish candlesticks. Just like the bullish equivalent to the black crows, the three white soldiers, stair steps up in price; this pattern stair steps down.

In order for that to happen, there needs to be a trend in place for the purpose of the reversal. The three black crows pattern can't be a reversal pattern if there's nothing to reverse.

Each candlestick needs to open below the previous day's open. In other words, each candle opens within the real body of the preceding candle then closes lower then the same preceding candle. There also should be little to no wicks formed on the candles.

This happens because the bulls have given up. The bears see that and take full advantage of it pushing price down for three consecutive trading sessions.

At the start of each of those trading days the bulls do put in some effort. However at that point in time they can't sustain it and the bears take advantage (bookmark our penny stocks list and stock watch lists pages, which are updated daily).

three black crows patterns

2. Technicals of Three Black Crows Patterns

Using technical analysis basics can be helpful in confirming a move. Support and resistance are incredibly important levels traders pay attention to.

When trading three black crows patterns you might want to make sure that the stock is at resistance at or near the formation of this pattern. At the same time as it falls, look at where support is.

Candlesticks as well as moving average lines form those levels. If you look at the Citigroup chart above, you'll notice that the moving average lines converged together and price traded sideways while never getting above a certain price. This was a key resistance level that the bulls couldn't break.

As price breaks down it could get into oversold territory. Consolidation occurs to correct that which in turn might make you think the trend is reversing. Look at RSI to see where it's at.

If they break support levels, then you have confirmation that a new strong downtrend is in effect. This downturn could be long term or an intermediate amount of time. Take our candlestick reversals course.

three black crows patterns

Citigroup formed the three black crows pattern after a period of trading up then sideways. You can see bear flag patterns as price reversed and moved downward.

How to Trade Three Black Crows Patterns

  1. Knowing how to trade three black crows is quite simple: 
  2. Traders take a short position when price breaks below the low of the 3rd bearish candlestick.
  3. They use a candlestick close above the 2nd candlestick as a stop level.

1. The Importance of Patterns

Patterns on stock charts are constantly breaking down hence the importance of being able to see patterns within patterns. Stocks form those large patterns like ascending triangle patterns, bull pennants or falling wedge patterns.

Bullish and bearish patterns form within each other. That can affect the outcome of the pattern you're seeing not to mention make a stock move differently than you thought.

Inside those larger patterns are medium sized ones like inverted cup and handles or inverse head and shoulders. Housed within those are even smaller patterns like three black crows patterns.

Not only do candlesticks patterns tell a story but also the single candles itself. The single candles can in turn be giving you hints and warnings about a breakout or breakdown. That is the importance of knowing not only what candlesticks mean but also what patterns they're forming.

We teach how to trade candlesticks in our trading rooms. Check out our trading service to learn more.

three black crows patterns

The SPX was in an uptrend for quite awhile. It then formed two head and shoulders patterns. The second house the three black crows pattern which formed the head. Price moved back up instead of falling because it was forming the right shoulder. Once that happened price tanked. The 200 SMA became an incredibly key support level. Price tried to break it multiple times without succeeding.

Final Thoughts

3 black crows patterns are seen as bearish reversal patterns. If three black crows patterns form then you want to really consider closing out any long trades. Use technical indicators as well as patterns to confirm any moves. Each tool when used together is helpful to making good trading decisions.

It's never a waste of time to study and practice finding patterns as well trading them. Practice helps to work out any kinks that can cause you to lose profit. Take our free online trading courses

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