Upside Gap Two Crows

The upside gap two crows pattern is a three-day formation on candlestick charts that typically develops in the following manner: Day 1 - A bullish day that continues the uptrend, represented by a long white candlestick, which indicates that the closing price of the index or security is well above the opening price.

Upside gap two crows is a bearish market reversal signal in technical analysis. The upside gap two crows pattern is a three-day formation on candlestick charts that typically develops in the following manner:

Day 1 - A bullish day that continues the uptrend, represented by a long white candlestick, which indicates that the closing price of the index or security is well above the opening price.

Day 2 - A bearish day despite the index or security gapping higher at the open, represented by a small black or colored candlestick.

Day 3 - A second bearish day, with the index or security opening higher than the Day 2 open, but closing below the Day 2 close and above the Day 1 close. This is visually represented by a bigger black or colored candlestick that "engulfs" the Day 2 candlestick.

There are several important hallmarks of this pattern. First, the pattern must form during a clear uptrend. Second, the first candle must be a large bullish candlestick (white or green) that continues an uptrend. This candle must be also be followed by a bearish candlestick (black or red) that gaps up and has a small real body. Lastly, the third candle must be another bearish candlestick (black or red) that gaps up. This last candle must engulf the second candlestick, meaning that it opens above it and closes below it. However, it must still close above the first day’s close.

The upside gap two crows is viewed by chartists as a somewhat ominous pattern, since it potentially signals that the index or security may be rolling over as its upward move ends and a downtrend begins. The rationale for this interpretation is that despite two stronger opens (on Days 2 and 3), the bulls have been unable to maintain upward momentum, suggesting that sentiment is turning from bullish to bearish.

Although fairly rare, the upside gap two crows pattern certainly can certainly be foreboding. The high opens fail to hold, the market continues to close lower than it opens, and the crows are "circling overhead." So, if a trader spots these two crows, they should watch until they receive confirmation that provides enough confidence to step forward and make a successful trade. Without confirmation, the upside gap two crows is simply a small pause in an uptrend.