The Two Crows Pattern is an average 3 candle bearish reversal pattern occurring during an uptrend.
The Two Crows Pattern is a 3-day top-reversal pattern. Like the Upside Gap, the Two Crows is a gap pattern, created between the long white candle at the top of an uptrend and the small black candle at the second day.
The first candlestick is a long white candle; a continuation of the upward trend.
The second candlestick is a black candle which gaps open and then trades down before the end of the day. Even though the close is lower than the open, it did not fill the gap.
The third day opens in the body of the small black candle. This time the gap closes and the price has traded back down within the white candle body.
Rules:
The upward trend has been fairly consistent for a good period of time.
The first candlestick is a long white candle that continues the uptrend.
The real body of the second day is black while gapping up and not filling the gap. The close is above the close of the first day.
The third day opens within the body of the second day, and closes within the white candle’s body. This produces a black candle that filled in the gap.
Signal Strengtheners:
If near the top of the 12 month high, or at a strong point of resistance, the more likely a reversal is occurring.
If the third day were to close more than halfway down the white candle, it would form an Evening Star Pattern.
General Analysis:
After a strong uptrend has been in effect, the atmosphere is bullish. The price gap opens but cannot hold the gains. Before the end of the day, the bears step in and take the price back down which indicates weakness in the Bulls camp. But the gap up from the white candle was not filled, forming a “star” day.
The next day, the price opens slightly higher than the previous close, within the body of the previous black candle. The bulls are concerned they cannot keep the momentum going. Prices head lower and closes in the white candle range. At this point, the Bulls start covering their positions while the Bears take control.
The further the third day closes into the white candle body, the more bearish the implications. A confirmation on the fourth day is highly suggested to show that the uptrend has reversed. This confirmation may be in the form of a black candlestick, a large gap down or a lower close on the fourth day.
