Three Black Crows Candlestick Pattern: A Complete Trading Guide

When price trends are up, traders watch for signs that the momentum might be fading. The Three Black Crows candlestick pattern is one of those chart patterns that signals a shift in sentiment. It suggests that bearish sentiment is building, and a potential price reversal could be near. But before making any trading decisions, it’s important to understand what this pattern really means and how to use it properly.

This guide explains how the Three Black Crows pattern works, what it tells traders about trading volumes, and how to make informed trading decisions based on technical analysis.

The Black Crow pattern is a three-line bearish reversal candlestick pattern that appears after a current uptrend. It consists of three consecutive trading sessions with black (or red) candles, each opening within the previous candlestick’s body and closing near its low. This structure signals downward pressure and a possible shift from bullish to bearish patterns.

Key Characteristics:

• Forms after an uptrend reversal.
• Consists of three consecutive bearish candlesticks.
• Each candle opens within the previous candlestick’s body and closes near the low.
• The pattern suggests a shift in market sentiment from bullish to bearish reversal.

Traders see this pattern as a bearish signal that selling pressure is increasing, but they often wait for additional indicators before crafting a trading action plan. Steve Nison, a pioneer in candlestick analysis, popularized this pattern, emphasizing its importance in spotting strong reversal signals.

The Three Black Crows candlestick pattern is illustrated below.

• Forms after an uptrend reversal.
• Three strong, bearish candlesticks in a row.
• Each candle opens within the previous candlestick’s body.
• Each candle closes near its low, showing continued downward pressure.
• The pattern suggests a shift in control from buyers to sellers.
• Black crows formation signals potential trend direction change.

The Three Black Crows pattern shows a clear shift in sentiment. After a market upswing, buyers start to lose control. The first bearish candlestick signals increased selling pressure; the second confirms that sellers are still in charge, and the third shows sustained bearish downtrend momentum.

This pattern suggests that buyers are stepping aside and sellers are gaining control, pushing the pricing chart lower. However, if the price drop happens too quickly or with unusually large candles, it could signal short-term oversold conditions rather than a prolonged downtrend.

The Three Black Crows pattern is most effective after an uptrend, as it suggests a possible bearish trend reversal. If it appears in a sideways market, it may signal the start of a new downtrend. However, in strongly trending stock markets, it could simply indicate a short-term pullback rather than a potential trend reversal. One of the most powerful ways to use this pattern is in a strong, unbroken uptrend, if the three black crows pattern emerges it can be used as a long side mean reversion entry.

The Three Black Crows pattern is most reliable on the daily chart, where daily candles reflect stronger momentum shifts. Other time frames can also be used, however we recommend you backtest this (and all other) trading signals on the time frames and instruments that you are trading to ensure they give you a positive edge.

In high-volatility environments, the Three Black Crows pattern may lead to false signals, where sudden buybacks erase bearish momentum. In low-volatility environments, the real body of the candles carries more weight, as it indicates sustained downward pressure with fewer sudden reversals.

In fact one of my favorite ways to use the three black crows pattern is as a long side mean reversion entry signal for highly volatile stocks.

• Proper risk management strategies: Use stop-loss placement above the high of the first bearish candlestick.
• Entry strategy: Traders often wait for a minor pullback or confirmation from a fourth black candle before entering short.
• Take-profit orders: Use resistance levels or a reward ratio-based approach (e.g., 2:1 risk-reward ratio) to set realistic exit points.

• No follow-through selling: If the next candle is a bullish signal, the bearish signal weakens.
• Oversold conditions: If the pattern forms after an extended decline, it could indicate exhaustion rather than continuation.
• Strong support nearby: A bounce could occur instead of a breakdown if the pattern forms just above a key levels zone.

To trade the Three Black Crows using a technical analysis-based trading system to catch reversals:

1. Identify an upward trend before the pattern forms.
2. Detect a three-line bearish reversal candlestick pattern with three bearish candlesticks.
3. Require confirmation: Enter short only if the next candle closes lower.
4. Set stop-loss above the high of the first candle.
5. Backtest before using real capital.

To trade the Three Black Crows using a mean reversion system to catch reversals:

1. Identify an upward trend in a highly volatile stock before the pattern forms.
2. Detect a three-line bearish reversal candlestick pattern with three bearish candlesticks.
3. Enter long at the close of the third candle in the pattern.
4. Exit on the first sign of strength, eg. after a single up close, or after a close above a short term moving average (EMA(C,3).
5. Backtest before using real capital.

Traders should always test historical data before trading live.

Below is a simple AFL script to detect the Three Black Crows in Amibroker:

// Three Black Crows AFL Code for Amibroker

FirstCandle = Ref((Close < Open) AND (Close < Ref(Close, -1)),-2);

SecondCandle = Ref((Close < Open) AND (Open < Ref(Open, -1)) AND (Close < Ref(Close, -1)),-1);

ThirdCandle = (Close < Open) AND (Open < Ref(Open, -1)) AND (Close < Ref(Close, -1));

ThreeBlackCrows = FirstCandle AND SecondCandle AND ThirdCandle;

This script finds Three Black Crows patterns in uptrends and marks them with a red star.

The Three Black Crows three-line bearish reversal candlestick pattern can be an early bearish signal, but it must be confirmed by follow-through selling. It appears after an uptrend reversal and signals that sellers are gaining strength, but traders should always backtest it and use it in the right market conditions.
Using proper risk management strategies and waiting for confirmation can help avoid false signals. If you want to incorporate this pattern into your investment strategy, test it in a broader market context before using it in live trading opportunities.

Links to articles about other Candlestick Patterns

1. Doji
2. Hammer
3. Inverted Hammer
4. Bullish Engulfing
5. Bearish Engulfing
6. Morning Star
7. Evening Star
8. Shooting Star
9. Hanging Man
10. Piercing Pattern
11. Dark Cloud Cover
12. Three White Soldiers
13. Three Black Crows
14. Dragonfly Doji
15. Gravestone Doji
16. Spinning Top
17. Marubozu
18. Tweezer Top
19. Tweezer Bottom
20. Bullish Harami 
21. Bearish Harami
22. Rising Three Methods
23. Falling Three Methods
24. Bullish Abandoned Baby 
25. Bearish Abandoned Baby 
26. Bullish Kicker 
27. Bearish Kicker
28. Three Inside Up
29. Three Inside Down
30. Upside Gap Two Crows
31. Mat Hold
32. Upside Tasuki Gap
33. Downside Tasuki Gap