Three black crows often comes together with three white soldiers ( See more details about three white soldiers ) . Many traders think that three black crows is the opposite pattern of three white soldiers. And like other candlestick patterns, not all three black crows are meaningful. Different position, different trading value.
This article tries to introduce the three black crows pattern in detail and it mainly contains:
Three black crows should meet the following rules:
- Each candlestick should close at or near its low price (No or only short lower shadow).
- Each candlestick should open within its prior candlestick’s real body (Not essential for its variations).
- Three candlesticks should be bearish and consecutive decline.
- There should be an uptrend even if a very short-term uptrend.
See an example of three black crows. It is the USACAD H1 chart.
The price at B tried to up break the resistance of prior high A, but the bearish power was strong, it failed and finally formed a middle bearish candlestick 1. The bear kept attack, later the market formed bearish candlestick 2 and 3. Study the candlestick 1, 2, 3 and not hard to find that:
- Candlestick 1, 2 and 3 were all bearish and showed consecutive decline status.
- Candlestick 2 opened within the real body of candlestick 1, and candlestick 3 opened within the real body of candlestick
- Candlestick 1, 2 and 3 all had very short lower shadow.
- Candlestick 1, 2 and 3 appeared after a short uptrend.
So the three candlesticks 1, 2, 3 in the above circle formed a three black crows pattern. It showed the weakness of uptrend.
Although the market rebounded after this pattern, they were all small candlesticks. When the big bearish candlestick at C down broke the prior low support, the down trend was confirmed.
Of course, three black crows doesn’t mean the market will go down. In an uptrend market, the price may create a new high after a three black crows decline.
And in most case, three black crows is not bearish enough to be a confirmation signal. It could only be an alert. That is to say, when you see this pattern, you should have something in mind that the market may change.
But should you take actions right now? You’d better wait more confirmation, sometimes even it’s a big bearish candlestick (Long bearish candlestick could be a confirmation, but you should know if the price drops a lot in a short time, it may take the risk of oversold. It must be combined with your own strategy logic).
See an uptrend example. It’s USDJPY H1 chart.
There were three candlesticks in the circle. Study the three candlesticks and easy to find that:
- Three candlesticks were all bearish candlesticks.
- Candlestick 2 and 3 opened within the real body of their prior candlestick.
- Three candlesticks all had short lower shadow.
- They appeared after an uptrend.
So the three candlesticks in the circle area formed a three black crows pattern.
This kind of market trend appears frequently. It does not mean the market will adjust a lot or even reverse. In this example, it was just a small pullback, an adjustment to the prior quickly rise. Profitable traders chose to take their profits here.
When the low price of candlestick 3 hit the support area of prior high, the market was pushed up again and later a middle bullish candlestick broke out the high of three black crows. The market came back to the uptrend again.
However, the variations of three black crows appears more frequently than its standard pattern in the real market, so the variations are more worthy of attention.
Then what kind of patterns could be regarded as its variation?— the two latter candlesticks open just near ( not must within ) their prior candlestick real body.
Let’s see an example. It’s AUDUSD H1 chart.
Look at the three candlesticks in the first circle. They met the following rules:
- They were all relatively long bearish candlesticks.
- They were in consecutive decline.
- They appeared after a short-term rise.
- They all had short lower shadow.
But the candlestick 2 and 3 all opened a little lower than their prior close price, not within the real body. It was the variation of three black crows.
Besides the candlesticks in the first circle, there were also candlesticks 4, 5 and 6 in the second circle. Were they also three black crows? They were not, because the lower shadow of candlestick 4 was too long, it almost exceeded the length of real body.
Sometimes three black crows will appear in a form of gap, but it relatively rarely happens.
The below chart shows this kind of three black crows, it’s GBPJPY H1 chart.
The candlestick 1 upside gapped and appeared after a quickly rise. In general, upside gap was a sign of strong bullish power, but here the market chose to go down after opening, which was not a good news to bull. The latter candlestick 2 and 3 were all bearish and consecutive decline, they three formed a three black crows pattern.
In this example, the market began to adjust after the three black crows, When it finally dropped to the 50% of prior rise, the market stopped and turned to rise again. Soon the market broke the high resistance of three black crows and crated a new high.
Three black crows requires three candlesticks, so traders have to wait three candlesticks totally completed to identify if it is a three black crows pattern. However, sometimes, before the three black crows formed, the first bearish candlestick could form some other patterns with its prior candlesticks. For example, the first candlestick could form dark cloud cover or bearish engulfing with its prior bull candlestick, sometimes even form a evening star pattern with its prior two candlesticks. And in many case, before the three black crows formed, the individual candlestick itself and its characteristics are enough to identify the current market trend.
After Dark Cloud Cover-Example-1
The below chart shows a dark cloud cover ( See more strategies about dark cloud cover ) and three black crows pattern.
It’s Oil H1 chart. There are two circles in the chart, one blue and one black.
Loot at the candlestick 1 and 2 in the blue circle, they met the following rules.
- Candlestick 1 was bullish, candlestick 2 was bearish.
- Candlestick 2 opened above the bullish candlestick 1’ high price
- Candlestick 2 closed near its low price and below the midpoint of bullish candlestick 1’ real body.
So the two candlesticks in the blue circle formed a dark cloud cover pattern. It indicated the weakness of the uptrend. And the candlestick 2, 3 and 4 in the black circle formed a three black crows pattern, the candlestick 4 even down broke the prior support. All signs showed that the rebound after the prior supper long bearish candlestick was very likely to be end.
After Bearish Engulfing-Example-1
Not just dark cloud cover, three black crows also often appears with bearish engulfing patterns. See the chart below.
The candlestick 1 and 2 in the green circle appeared after a short rise, the candlestick 1 was bullish while the candlestick 2 was bearish. Note that the candlestick 2 opened above the candlestick 1 close price, and it closed below the candlestick 1 open price. That is to say, the candlestick 2 totally engulfed the real body of candlestick 1. So they two formed a bearish engulfing pattern finally. It appeared at the prior high resistance area and showed the weakness of bull, the candlestick 2, 3 and 4 in the black circle formed a three black crows. After that pattern several small bullish candlesticks appeared, but soon the market turned to quickly drop again.
After Bearish Engulfing-Example-2
See another example. It’s Oil H1 chart.
As the chart showed, the two candlesticks 1 and 2 in the blue circle formed a bearish engulfing pattern and the candlestick 2, 3, 4 in the black circle formed a three black crows.
The bearish engulfing was before the three black crows pattern, so some traders may take action just according to the bearish engulfing pattern rather than waiting for the three black crows completed. Why? The logic here is that the price rebounded to the prior resistance area and under the huge pressure formed the strong reversal signal—bearish engulfing pattern. Candlestick 2 here almost ate 4 prior candlesticks.
The entry, exit and even goal price was clear in this example. Traders could choose to take short position when the candlestick 2 closed, set the stop loss above the prior range area, some may even use indicators to filter noises, the goal price could be a little lower than the start of the rebound.
The above examples showed how three black crows combined with other candlestick patterns. Patterns such as dark cloud cover, bearish engulfing, evening star usually formed before the three black crows, so in many case traders take action in advance just according to them. The three black crows is a little slow.
In some other case, three black crows is also too slow. See a classical example. It’s still Oil H1 chart.
After a quickly decline the market began to rebound with a series of small candlesticks. When it rose to 38.2% Fibonacci area, under the huge pressure, a relatively super long bearish candlestick appeared. It almost engulfed the whole rebounded rise, which showed strong power of bear.
Later the market down gapped–another strong bearish signal! It finally formed a relatively long bearish candlestick 2 when closed, and more importantly, the candlestick 2 down broke the support of the rebound start. The market trend was clear. Soon the candlestick 3 appeared, though it was little short compared with candlestick 1 and 2.
They three candlesticks appeared after a rebound rise, they actually formed a three black crows pattern. And as showed in the chart, there were at least two strong bearish signals appeared before the three black crows.
Pullback strategies traders could take a short position after the candlestick 1, breakout strategies traders could enter the market after the candlestick 2. It was too late to trade according to the three black crows pattern completely formed. And what’s more, the market dropped so much and so quickly in that short time, the risk of oversold increased a lot. In fact, the market did react like that. The market began rebound right away after the three black crows.
See another example, It’s still Oil H1 chart.
The market rebounded from A, and candlestick 1 engulfed most of its prior bullish candlestick real body. The candlestick 2 down broke the support of A. In the meantime, some breakout traders began to take short position. When the candlestick 3 completed, they three formed a three black crows pattern. Compared with down breakout signal of candlestick 2, this pattern was too late.
Candlestick 4, 5 and 6 in another circle also formed a three black crows. It shall be noted that candlestick 4 almost engulfed prior 5 bullish candlesticks. This kind of super long candlestick is a symbol of strong trend, and itself could be an entry signal. The candlestick 6 down broke the support of B, breakout traders may take action after this, but it was too late compared with the signal of long candlestick 4 itself.
As mentioned before, the three black crows does not mean deep decline. In some obvious uptrend market, the three black crows is just a small normal price adjustment. When the price crates a new high after the adjustment, the market is likely to come back to the uptrend again.
The below chart shows it clearly. It’s Oil H1 chart.
The market was in obvious uptrend and the bearish candlesticks in the circle formed a three black crows pattern. It appeared near its prior high resistance area, however, the market did not adjust deeply. A big bullish candlestick appeared and up broke the high resistance after several small candlesticks. Obviously, this big bullish candlestick confirmed that the market came back to uptrend again.
It should be noted that here the three candlesticks were all small, it was not strong enough. If they were all long candlesticks, then this pattern should be considered carefully.
The below chart shows a relatively long candlestick three black crow pattern in an obviously uptrend market.
Candlestick 1 and its prior bullish candlestick actually formed a bearish engulfing pattern, candlestick 1, 2 and 3 in the circle formed a three black crows pattern. They were all relatively long candlesticks compared with prior ones.
The price moved up and created a new high with a big bullish candlestick, but the later three black crows pattern engulfed its rise, the previous breakout was more likely to be a false breakout.
Of course the market does not always moves like that. The below chart shows a similar trend.
The market was in obvious uptrend, and candlestick 1, 2 in the blue circle formed a bearish engulfing pattern, candlestick 2, 3, 4 in the black circle formed a three black crows. Although the candlesticks of three black crows was relatively long, but the market did not keep dropping after that. On the contrary, it stopped and began to rise again with a series of small candlesticks.
Sometimes when the three black crows forms, the price has fallen a lot, the market may come into an oversold status. And sometimes in an uptrend market, the three black crows may appear when the market is in an overbought status.
The three candlesticks in the circle formed a three black crows pattern. They were relatively long candlesticks and the price dropped a lot in very short time. RSI was below 30 as the red zone showed in the chart, the market was oversold.
In this example, the price began to rise after the pattern. Traders should pay attention to this kind of case. Nobody wants to see that once the short position orders placed, however, the market moved in the opposite direction of expectation right away.
Sometimes three black crows may appear in an overbought uptrend market. The below GBPUSD H1 chart showed it clearly.
It shall be noted that there was RSI divergence at A-B, since then the market began to rise. Along with the quickly rise, RSI was also above 70, the market was overbought. Then a three black crows pattern appeared. After that the market refused to drop more, later a series of small candlesticks up broke the resistance and created a new high.
In the terms of real trading strategies, three black crows is not used frequently, it‘s determined by its characteristics. Compared with dark cloud cover, bearish engulfing, evening stare and so on, three black crows is not bearish enough. And if to do some breakout trading, however, it’s often limited by the three candlesticks. Because when three candlesticks completed, in many case, the best trading opportunity has gone.
Some seemingly actionable strategies in fact will not work. For example, once three black crows appears, then take a short position when the market hit the price—3 pips below the low price of third candlestick. The winning rate is usually too low.
A relatively more reliable method is to trade those three black crows which appears near the important support or resistance area. And it would be more wonderful if it’s a rebound in a down trend market. The basic trading logic is considering the three black crows as a confirmation signal of rebound end at important position, although this signal is a little weak compared with some other candlestick patterns.
1. Trading Strategies With R/S
See an example. It’s EURGBP H1 chart.
The market was in obvious down trend. The shadow area passed A was a resistance area. The market rebounded from B and stopped near resistance area, then a three black crows pattern appeared. It could be regarded as a confirmation to the resistance area here, although it was not so bearish as others.
The below chart shows its trading model.
In this example, the market did not drop a lot after the three black crows, on the contrary, it began to rise again just after one bearish candlestick. If the market kept moving up, it would hit the stop loss, then traders must exit without hesitation, because it meant the original analysis was more likely to be wrong, the most important for now was to keep capital safe.
Unfortunately, although the market tried to up broke the resistance for the second time, it failed. Later the big bearish candlestick 5 down broken the prior platform support, it announced the end of rebound. So the open of candlestick 6 was a good entry. And the candlestick 4, 5, 6 formed a three black crows pattern, traders could trade after the three black crows formed. Here this pattern was regarded a confirmation, but it shall be noted that the three black crows signal here was obvious slow than the down breakout signal of candlestick 5.
2. Trading Strategies With Bollinger Bands
See another example with the Bollinger Bands. It’s EURGBP H1 chart.
The market was in congestion zone after a decline. The price moved up from A and tried to break out the resistance for the third time, but a bearish candlestick 1 destroyed it. As the chart showed, it almost ate all the rise of prior bullish candlestick (if totally engulfed, they formed a bearish engulfing pattern). Then the candlestick 2 down broke the support of A, and when the candlestick 3 completed, this huge bearish candlestick down broke the whole congestion zone, it announced that the market come back to downtrend again, the congestion zone was over.
In this example, the Bollinger Bands was narrow before the candlestick 2 and 3 appeared. When the candlestick 3 completed, the Bollinger Bands totally opened, and this candlestick 3 showed the market movement direction. In the terms of trading, traders could trade when the candlestick down broken the support of A, and when the candlestick 3 down broken B, more traders would choose to enter the market.
Sometimes three black crows could combined with upper Bollinger bands channel. It has no difference with dark cloud cover, bearish engulfing and so on in essence in this condition.
See the chart below. It’s EURGBP H1 chart.
After the price up broke the prior dark cloud cover high resistance, the continuously rise seemed to indicate that the down trend may end. However, middle bearish candlestick 1 appeared, and later more bearish candlesticks formed. Study these candlesticks, indicators and not hard to find that:
- Candlestick 1 appeared at the prior highs resistance area. As the chart showed, the candlestick A has a very long upper shadow, which showed the huge pressure of resistance.
- Candlestick 1, 2 and 3 formed a three black crows pattern and appeared at the upper Bollinger bands channel. Here it was a similar signal with dark cloud cover.
- MA 120 obviously down moved, more importantly, the price up broke out the MA, however, it was pulled below the MA quickly.
- RSI showed an overbought status.
Here several different kinds of signals confirmed each other, it was much more reliable. The market started a new decline after the three black crows pattern.
3. Trading Strategies With False Breakout
Besides, sometimes three black crows is a wonderful pattern to identify the false breakout. If lucky enough, traders even could enter the market at the start of a super down trend.
The below chart shows it clearly, it’s XAUUSD H1 chart.
Candlestick 1 up broke out the resistance of A when it closed, many traders chose to take long position at this time, and they expected the price would rise more. However, the latter candlestick 2 went down and engulfed the most rise of candlestick 1. In fact, they two formed a dark cloud cover pattern. Later the candlestick 3 and 4 appeared, they’ve dropped to the lower part of the congestion zone A-B.
It shall be noted that candlestick 2, 3, 4 in the circle actually formed three black crows pattern. Here this pattern almost confirmed that the prior breakout was a false breakout, it was a good chance to take a short position. In fact, the latter market movement proved that it was a wise choice to take a short position here, the price dropped below $1200!
Three black crows is more effective than dark cloud cover pattern on identifying false breakout. For dark cloud cover, there is only one bearish candlestick, and this one bearish candlestick after the breakout may be the normal market action, because some profitable traders choose to take their profits.
However, if there are several consecutive decline bearish candlesticks after the breakout, and the price drops below the midpoint of the congestion zone, even below the whole congestion zone bottom, then the prior breakout is more likely to be a false breakout.
See another example, it’s still XAUUSD H1 chart.
Candlestick 2, 3 and 4 formed a three black crows, the candlestick 2 engulfed most rise of candlestick 1, more importantly, the candlestick 4 down broke out the support of A. In this case, will you still think that the upside breakout is a true breakout?
It shall be noted that here the three black crows pattern should dropped below the congestion zone top. The more it dropped, the more likely to be a false breakout.
See the example below, it’s AUDUSD H1 chart.
The market up broke the resistance of A with a big bullish candlestick, and after that three consecutive candlesticks formed a three black crows as the chart showed. However, the market did not drop just like the above examples.
Why? Considering A-B as a congestion zone and find that the decline part of three black crows below A was not too much, the red zone in the chart showed it clearly. In this case, three black crows was more likely to be a normal price adjustment.