Tutorial on Three Black Crows Candlestick Pattern

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Tutorial on Three Black Crows Bearish Candlestick Pattern

What is the Three Black Crows Candlestick Pattern?

Three Black Crows Candlestick Pattern is a bearish reversal candlestick pattern with high reliability that occurs during an uptrend. As the name suggests, this pattern consists of three consecutive bearish long body candlesticks that open within the body of the previous candle and close below the low of the previous candle. These candlesticks should have long bodies and small shadows, or they can also be bearish marubozu candles. This pattern is the inverse of the Three White Soldiers Candlestick Pattern.

How to Identify the Three Black Crows Candlestick Pattern?

Three bearish candles with long bodies are required to identify this candlestick pattern.
First Candle - This pattern's initial candlestick should be a long-bodied bearish candlestick that appears as a continuation of the current uptrend.
Second Candle - It should be open inside the body of the previous candle, preferably between the midpoint and closing price. The second candle's closing & low price should be lower than the preceding candle's close & low Price.
Third Candle - A bearish candle with little or no shadows, like a marubozu candle. Similar to the second candle, it should be open within the body of the preceding candle and, preferably, between the previous candle midpoint and closing price.

Points to Consider before Trading with Three Black Crows Candlestick Pattern

When three black crows appear after a strong uptrend, they strongly suggest a potential bearish reversal.

While trading using the Three Black Crows Pattern, keep in mind that a strong downward move may generate a momentary oversold condition. For example, consider the technical indicator RSI, which may have dropped below 30.

There may be a small period of consolidation following the three black crows pattern, but the short and intermediate term bias remains bearish. The stock may consolidate before continuing to fall as the large move approaches major support levels.

Regardless of how strongly it suggests a potential reversal, it is always good to combine it with other technical indicators for confirmation. It can be used with the Relative Strength Index (RSI), Stochastic (RSI), Moving Average, and a variety of other indicators. A more reliable signal for trend identification will be provided by volume confirmation.

Three Black Crows Pattern indicates a significant trend change. Traders must consider the size of candles and shadows to avoid the likelihood of retracement.

Trading with Three Black Crows Candlestick Pattern

1) Three Black Crows Price Action Strategy
When three black crows appear after an uptrend, traders look at or think about shorting at that point. But it can be a false signal. Looking at trading volume and technical indicators (leading or movementum indicators are preferable) will increase the strength of the pattern. It is also important to consider how all three candles appear, such as their body size, shadow height, and opening and closing prices. In many cases, after the formation of three black crows, aggressive traders immediately go for shorting, and after that, instead of falling, that particular stock starts to rise again, which leads to triggered stop loss. To avoid this mistake, wait for the next candle formation; if it is bearish and it closes below the previous candle (that is, the last candle of three black crows), then you can take entry there; and if the next candle is bullish but with low volume, then again wait for the next candle for confirmation or entry.

Three Black Crows Price Action Strategy Example

2) Three Black Crows & Stochastic (Slow) Trading Strategy
Traders can employ stochastic (slow) trading strategies in conjunction with Three Black Crows. The stochastics indicator indicates whether a security is overbought or oversold. As mentioned above, three black crows is a trend reversal candlestick pattern that forms after an uptrend. When applying this strategy, keep in mind that, due to the uptrend, the stochastic at that time should be in the overbought zone, which is above 70, & that along with or before the formation of the pattern, the stochastic line (%K) should cross below the signal line (%D), which is also called a stochastic bearish crossover. It signifies a strong bearish reversal. When both the pattern and the indicator indicate a bearish trend, the trader can enter a short position. Increasing selling volume with each of the three black crow candles makes this pattern more strong and accurate.

The Three Black Crows candlestick pattern is beneficial for both short-term and intermediate-term investing strategies. Swing traders can use this candlestick pattern into their strategies on daily or weekly Tick. This pattern is useful to any tick, hence intraday traders can use it as well.

Advantages & Disadvantages of Bullish Marubozu Candlestick Pattern

Advantages of Three Black Crows

When it appears at uptrend then this pattern is strong bearish reversal with high reliability.
Three black crows candlestick patterns are easy to identify on a trading chart.
This pattern also indicates the increase in selling pressure by traders and investors.
This pattern provides a good entry signal, which can be also identified by the beginner trader.
Useful for all ticks such as intraday ticks, daily, weekly, and so on.

Disadvantages of Three Black Crows

The main drawback of the Three Black Crows pattern is that it may occur during a consolidation period. This might lead to mixed sentiments, making it easy to be caught on the wrong side of the market.
While trading with this candlestick pattern traders sell at low price as the shorting position gets triggered when the lowest price of this pattern formation is crossed. So traders' entry position is already at lower, so they need to buy at an even lower price for you to make a profit.
Stop loss is set at the first candles high, so its points are big in numbers, hence traders need to be patient and smart about when to exit. Scalper traders can look for quick profit at risk reward ratio of 1:1 or less than that.
It is hard to find on trading charts, especially on a longer timeframe.

How TSR Screeners Can Help to Scan Three Black Crows?

1 Pre Screener.
TSR will provide you with pre-created screeners in PreScreener, which you can simply select from. For example, Three Black Crows on Daily tick.

2 Custom Screener.
(A) In custom screener you can select multiple candlestick patterns along with Three Black Crows, such as bearish marubozu, three inside up, and many more.

Multiple Pattern With Three Black Crows In One Screener

(B) Create your own powerful, customised strategies with Custom Screener. For example, Three Black Crows formed and Stochastic (Slow) %K crossed below the signal line %D (Bearish Reversal ) in the Overbought zone (above 70) on Daily Tick. ( You can choose from a variety of ticks in TopStockResearch, from a 5-minute tick to a monthly tick, and choose your stock basket depending on your needs.)

Three Black Crows And Stock Slow Strategy Builting

3.Build customise Three Black Crows using OHLC.

Built Three Black Crows Using OHLC Screener

Simple Three Black Crows Screeners are available in public view for free while more comprehensive screeners are available to premium customers.