The Three Black Crows is one of the most powerful bearish reversal patterns in candlestick charting. When this pattern appears after an uptrend, it signals that sellers have taken control and the price is likely to continue falling. In this guide, we will break down everything you need to know about trading this pattern effectively.
What is the Three Black Crows Pattern?
The Three Black Crows pattern consists of three consecutive long bearish (red or black) candlesticks that form after an uptrend. Each candle opens within the body of the previous candle and closes lower than the previous close. The pattern gets its name from the image of three crows sitting on a tree branch, which was historically considered an omen of bad news.
Key Characteristics: Three consecutive bearish candles, each opening within the prior body and closing at or near its low. The pattern must appear after a clear uptrend to be valid as a reversal signal.
How to Identify the Pattern
To correctly identify the Three Black Crows pattern, look for these specific criteria:
- Preceding uptrend: The pattern must appear after a sustained upward price movement
- Three bearish candles: All three candles must close lower than they opened
- Long bodies: Each candle should have a relatively long body, showing strong selling pressure
- Opening gap: Each candle opens within the body of the previous candle (not necessarily at a gap)
- Close near lows: Each candle should close at or near its low, with minimal lower wicks
What the Pattern Tells You
The Three Black Crows pattern reveals a significant shift in market sentiment. Here is what is happening behind the scenes:
Psychology Behind the Pattern
- First candle: Sellers emerge after the uptrend, pushing prices down and creating the first bearish candle
- Second candle: Buyers try to push back at the open, but sellers overwhelm them, driving prices lower again
- Third candle: Any remaining bullish sentiment is crushed as sellers continue their dominance
By the end of the third candle, the message is clear: bulls have lost control and bears are now in charge.
Trading Strategies for Three Black Crows
Strategy 1: Enter on Pattern Completion
The most straightforward approach is to enter a short position (or exit long positions) after the third candle closes.
Example Trade Setup
Stock XYZ has been trending up and forms a Three Black Crows pattern:
- First candle closes at $98 (down from $102 open)
- Second candle opens at $99, closes at $95
- Third candle opens at $96, closes at $92
- Entry: Short at $92 after third candle closes
- Stop loss: Above the first candle high at $103
- Target: $82 (measuring the pattern height projected down)
Strategy 2: Wait for Confirmation
More conservative traders wait for additional confirmation before entering. This could include:
- A fourth bearish candle continuing the move
- Price breaking below a key support level
- Increased volume on the pattern
- Other technical indicators confirming the bearish bias (RSI dropping, MACD crossover)
Strategy 3: Options Approach
Options traders can use the Three Black Crows pattern to time bearish options strategies:
- Buy put options for directional downside bets
- Sell call credit spreads above the pattern high
- Enter bear put spreads for defined risk trades
Volume Confirmation
The most reliable Three Black Crows patterns are accompanied by increasing volume on each successive candle. This shows that selling pressure is building, not diminishing. If volume decreases across the three candles, the pattern may be weaker and more likely to fail.
Common Mistakes to Avoid
- Trading without an uptrend: The pattern only works as a reversal signal after an uptrend
- Ignoring candle size: Small-bodied candles do not count as valid crows
- Forgetting stop losses: Always protect your position in case the pattern fails
- Trading in isolation: Use other technical analysis tools to confirm the signal
- Over-leveraging: Even reliable patterns fail sometimes, so manage your risk
Three Black Crows vs Three White Soldiers
The Three White Soldiers is the bullish opposite of the Three Black Crows. While crows signal bearish reversals after uptrends, soldiers signal bullish reversals after downtrends. Both patterns share the same structure (three consecutive candles) but point in opposite directions.
Best Timeframes for This Pattern
The Three Black Crows pattern works on any timeframe, but it tends to be most reliable on:
- Daily charts: Best for swing traders looking for multi-day moves
- 4-hour charts: Good balance between signal frequency and reliability
- Weekly charts: Strongest signals for longer-term position traders
Avoid trading this pattern on very short timeframes (1-minute or 5-minute) as the signals are less reliable.
Track Your Pattern Trading Results
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Summary
The Three Black Crows is a powerful bearish reversal pattern that signals the end of an uptrend. When you spot three consecutive long bearish candles after an upward move, it is time to consider short positions or exiting longs. Always confirm the pattern with volume analysis and other technical indicators for the best results.
Want to learn more about candlestick patterns? Check out our guide on the hanging man pattern or learn about marubozu candles.