What is Three Black Crows Patterns?
The Three Black Crows Pattern, also known as the “Black Three Soldiers,” refers to three consecutive down candles that persist in declining, indicating a bearish outlook for the market. It is the inverse counterpart of the Bullish Three Soldiers and occurs when the market is either near the top or has been at a high level for a while. This type of candlestick pattern generally indicates that the stock price will continue to fall.
The Three Black Crows pattern occurs at the beginning of a downtrend when the bears have gained control and start to make gains. It is important to note that this pattern is only valid when it occurs at the beginning of a downtrend. At the end of a downtrend, sometimes there is also a Three Black Crows pattern, but this is not similar to the Three Black Crows pattern.
The features of the Three Black Crows pattern are:
- Three consecutive long black candles appearing in an uptrend.
- Each day’s closing price is lower than the previous day’s low.
- Each day’s opening price is within the previous day’s body.
- Each day’s closing price is equal to or close to the day’s low.
- If each black candle has little to no upper and lower shadow, it is called “Three Embryo Black Crows,” indicating a greater bearish outlook for the market.
Strategy Application
If you see the Three Black Crows pattern, it is generally possible to establish a short position after the pattern is confirmed, or to establish a short position that breaks through and follows at your discretion.
The first day is generally a waiting period, when the market is unclear and market confidence is not strong, and the outlook for the market is not high.
On the second day, the Three Black Crows pattern has begun to take shape, and you may consider establishing a light short position. Stop loss can be set above the important resistance area.
On the third day, the Three Black Crows pattern is established and you may enter the market to establish a short position.
As shown in the following example chart:
