What is the Upside Gap Two Crows Candlestick Pattern?

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  • 20 Dec 2023
What is the Upside Gap Two Crows Candlestick Pattern?

Key Highlights

  • The upside gap two crows is a bearish reversal pattern. It consists of three candles that appear during an uptrend.
  • The pattern starts with a large up-candle. A bearish candle with an upward gap follows it. Finally, a smaller candle engulfs the second one.
  • Traders may observe this pattern when an uptrend is near its peak. This suggests a possible trend reversal in the market.
  • Volume is a crucial factor in validating the upside gap two crows candlestick pattern. Traders should look for confirmation signals and consider the market conditions while using them.

Three candles form the upside gap two crows candlestick pattern on the candlestick chart. It shows a moderate change in prices. Traders might see the upside gap two crows candlestick pattern when an uptrend is nearing its peak. This may help identify reversion as a potential risk in future.

The upside gap two crows pattern starts with a large up-candle. It has a gap slightly above the candle that lies below it. Later, the larger down-candle joins the previous one in an engulfing pattern. However, you might not see a reversal lower. After the upward gap and two crows candlestick formation, the price may go in either direction.

During an upswing, the first candle starts with a long, white, real, rising body. This candle indicates the difference between the candle's opening and closing prices. There is a high-security gap at the time of opening. Still, the second bearish candle shows an upward gap. This candle creates a space between the opening and closure of the preceding candles.

The second candle lies within the third one, which is relatively small. The third candle actually forms above the opening of the second candle. It closes under the second candle's close and above the first candle’s close. So, it engulfs the preceding candle. Further, the third candle tries to fill the gap by forming a bearish push between the first and second candles. Additionally, the third candle's bearish trend lowers the stock's price.

After learning the upside gap two crows meaning, let’s see how to interpret it. The market sentiment will be quite positive when there is a bullish trend. This indicates that there is strong buying pressure. This pushes the market higher and creates the pattern's first bullish candle. The market begins with a significant positive gap. This increases the bullish sentiment throughout the upcoming trading session.

However, bears will get exhausted after driving the market higher for a long period. This becomes obvious when the market falls and closes the candle with negative values. Yet, bulls don’t give up. The following positive gap is due to the final effort by the bullish traders. They try to drive the market upward.

This time, bearish forces return with more intensity. This happens even though the positive gap is present. This is quite clear as the market produces a negative candle this time that engulfs the previous bearish candle. This is the final indication that bullish forces don’t have power. It indicates a downtrend.

The three black crows candlestick pattern begins with three candles forming a bearish reversal pattern. They suggest that instead of bears, the bulls now hold the power. The three black crows pattern and the upside gap two crows candlestick pattern both suggest an identical uptrend reversal.

Yet, they differ slightly from one another. Three lengthy bearish reversal pattern candles are shown in three black crows. This occurs when the market is on an off-track rise, giving bears the upper hand and driving down the price of the stock.

Here’s a table summarising the differences between the upside gap two crows and three black crows candlestick pattern.

Feature Upside Gap Two Crows Three Black Crows
DescriptionA bearish reversal pattern consisting of three candlesA bearish reversal pattern that has three candles
FormationAn upward gap followed by three consecutive bearish candlesThree consecutive bearish candles
Momentum StrengthIndicates a weakening of bullish momentumIndicates a strong bearish momentum

Conclusion

The Upside Gap Two Crows is a bearish reversal candlestick pattern. It provides traders with necessary information regarding possible changes in market sentiment. It implies that there may be a downturn following a period of bullish sentiment. Volume is a key factor in validating this pattern. It may suggest traders to liquidate long positions or open new ones. This pattern is an effective tool for traders. However, traders should be careful while interpreting the pattern. So, they must constantly look for confirmation signals. You should always use it along with other indicators.

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