the hAnDbook of technIcAl AnAlysIsDescription:■ (^) The three black crows formation is a triple candlestick reversal pattern. See
Figure 14.29.
■ (^) All three candlesticks are bearish and their real bodies should overlap (otherwise
it would be called three identical crows). The three real bodies should close
with successively lower lows.
■ (^) The upper and lower shadows are not significant.
■ (^) The color of the three candlesticks is highly significant.
■ (^) It is best found in a protracted uptrend that is beginning to display weakness.
■ (^) Its corresponding bullish version is the three white soldiers formation.
Psychology:
■ (^) The three black crows formation is found at the top of a bullish trend where
the buyers were initially in control. Then the sellers begin to drive the prices
down with the appearance of the first strong bearish candle. The buyers try
to resume control, evidenced by the upside opening gap in the second candle-
stick. But the sellers drive prices down further. The process is repeated one last
time before the buyers retreat, relinquishing whatever control they had left in
the market. The bears are now in control.
Trigger, Stoploss, and Confirmation:
■ (^) The trigger is at the low of the second bearish candlestick.
■ (^) To confirm the reversal, the third candlestick needs to close below this trigger level.
■ (^) The stoploss is placed at the high of the first bearish candlestick or pattern.
■ (^) A buystop entry order may be placed at the high of the candlestick pattern
only if there is evidence that the trend is still in effect.
figure 14.29 A Three Black Crow Formation.
three black Crows