Definition - When this pattern occurs, it suggests that there is a strong reversal in the market. In the Bearish Three Black Crows, the three normal or long candlesticks will open higher than the last close whilst closing at lower levels progressively. In essence, this creates a staircase-looking patterns which acts as a signal for the reversal.
- Over three consecutive days, normal or long black candlesticks are seen in a market experiencing a prevailing uptrend.
- As each candlestick appears, they open inside the body of the day before.
- On each day, the candlesticks close at new lows below the previous day.
Patterns and Flexibility
For the pattern to exist, there needs to be three normal or long black candlesticks with the final two opening inside the trading range of the candlestick before it; in addition to this, it must close lower than the last.
Behaviour of Trader
Although the market has been in an uptrend, the arrival of this pattern suggests that it has been this way for too long. Just after the market appears to have reached the top, a downward motion will be seen in the black candlestick. Over the next two days, the prices continue to erode which is seen in the lower closes and the bulls are soon forced into a decision.
Sell/Stop Loss Levels
For there to be confirmation, the prices must cross below the confirmation level which, in this case, is considered to be the last close whilst the stop loss is seen as the last high. If the prices rise following the bearish signal, the stop loss will be triggered if there are two consecutive days of highs above the stop loss level.