Top reversal pattern: three crows

On a candlestick chart, you may want to be careful if you see three consecutive falling yin lines during a period of uptrend, which may be a signal of a price trend reversal.

This candlestick pattern has a very figurative name, called three crows.

This article will give you a deeper understanding of this pattern.

What are three crows?

Three crows are a common bearish candlestick pattern that usually appears on top of an uptrend.

As the name implies, its pattern is composed of three consecutive falling yin lines, three of which close a day lower than the day.

If the stock has appeared in the form of three crows, it may be a potential peaking signal.

Three crows are similar to the three White Samurai, but flip the form. Three white warriors appear at the end of a downtrend, signaling a potential bottoming signal.

How are the three crows formed?

A standard form of three crows generally has the following characteristics:

• Falling yin line appears for three consecutive days. Ideally, the three positive wires have a longer solid and similar solid length.

• The opening price for each bar is lower than the previous day's opening price, and the opening price is embedded in the previous entity. There is an overlap between the K-line solids.

• The closing price of each candlestick is lower than the previous day's closing price, forming a falling ladder shape.

• The closing price for each bar is either the lowest price of the day or near the lowest price. Therefore, each k-line has almost no lower shadow, or the lower shadow is very short.

The location where the three crows appear is important.

When three crows appear at the top of an uptrend, it indicates long strength is failing and the short power is strengthening. So it may be a wave of falling open signals.

When three crows appear in a downtrend or consolidation, this time it implies that the trend may continue, not reverse.

How to identify three crows?

In an actual trade, when identifying three crow patterns as reversal signals, the following steps can be done:

• Identify uptrend:Finding a clear uptrend before the pattern arises, which sets the foundation for a potential reversal.

• Locating the three continuous falling yin lines:At the top of the uptrend, find three consecutive falling yin lines, the closing price of the three is lower every day than the day, and the lower shadow line is short or not. Ideally, the solid size is similar. This means that the bear may have firmly controlled the situation and the trend may reverse.

• Focus on volume:The possibility of reversal of the signal can be confirmed by volume. If the volume is low when the rising trend, and the three falling yin volume amplified, it may indicate a strong bearish sentiment.

In addition, after the appearance of three crows, there may sometimes be overfall, thus entering a short-term consolidation rather than immediately falling, but the overall sentiment is still bearish. This can be judged by the RSI indicator and support level and other technical indicators.

case analysis

The chart below shows a pattern of three crows that appear on the daily chart of TSMC (TSM) shares.

• On the chart, you can see that the stock price experienced a clear wave of rally before the appearance of the three crows, indicating a strong buying sentiment.

• At the top of the uptrend, three consecutive days fall Yin line, three yin line closing price is lower than one day, and the lower shadow line is very short or not, the formation of three crows form, indicating the bearish in firmly grasp the initiative, revealing the share price peaking signal.

• Since then, TSMC's shares have indeed ushered in a longer downtrend.

summed

Three crows are a bearish pattern consisting of three candlestick, usually appearing at the top of an uptrend.

However, this pattern is not 100% effective and failure is also very common.

In actual combat, candlestick patterns should be combined with other technical analysis tools to better assist trading decisions.