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Thursday, October 9, 2008

Three Black Crows Candlestick Pattern

Three black crows is a bearish candlestick pattern, which indicate the possible reversal of an uptrend and start of a downtrend. Usually this pattern is formed at the top of an uptrend. Thee black crows pattern is three long dark (colored or bearish) candlesticks each closed below than previous day’s close.


The requirements of bearish three black crows candlestick pattern include
  • The pattern should be formed after a significant uptrend.
  • There should be three long dark candlesticks each closing at a new low.
  • The opening price of each candlestick must be within previous candlestick body.
Bearish three black crows candlestick pattern is formed when the prices of instruments are at their highest prices (overbought conditions). On first day, because of increasing selling pressure, the price closes below the opening price of prior bullish candlestick. On second and third day the prices open above the previous day’s closing price but the increasing selling pressure causes the prices to close at lower levels than previous day’s closing price.

Thee black crows pattern is a modestly reliable candlestick pattern, which best support swing traders and position traders. The reliability of the pattern increases with 1) length of the candlesticks (but extremely lengthy candlesticks can create over-sold conditions), 2) shortening of lower shadow of candles and 3) with increase in trading volume.

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