How to Trade the Upside Gap Two Crows Candlestick Pattern Like a Pro

The Upside Gap Two Crows candlestick pattern is a bearish reversal candlestick pattern that forms in an uptrend and signals a potential shift to the downside.

It consists of three candlesticks: a strong bullish candle, followed by two smaller bearish candles that gap up but fail to continue the rally. Traders interpret this as a warning that buyers are losing control and sellers are stepping in.

This pattern is not as common as other bearish reversal candlestick patterns, but it can indicate a strong move lower when it appears at the top of an uptrend.

The Upside Gap Two Crows consists of three candlesticks and appears after an uptrend:

1. First candle – A strong bullish candlestick, confirming the ongoing uptrend.
2. Second candle – A small bearish candle that gaps above the first candle’s close, indicating initial bullish enthusiasm that quickly fades.
3. Third candle – Another bearish candle that opens within the second candle’s range but then closes lower, preferably within the first candle’s body.

   The key element here is the gap on the second candle, followed by another on the third candle, which ultimately fails to hold, leading to a breakdown.

   This pattern suggests that the market attempted to push higher, but sellers quickly overwhelmed buyers, leading to lower closes.

The Upside Gap Two Crows candlestick pattern is illustrated below.

• Appears after an uptrend, indicating a possible bearish reversal.
• Three-candlestick structure:
  • • First candle is bullish and confirms the existing uptrend.
    • Second candle gaps up but closes bearish, showing early signs of selling pressure.
    • Third candle gaps up again but fails, closing lower within the first candle’s body.
• The pattern is stronger when the third candle closes near the first candle’s midpoint or lower.
• Works best when confirmed by volume and resistance levels.

This pattern reflects buyer exhaustion and increasing selling pressure.

1. The first candle continues the uptrend, confirming buyers are still in control.
2. The second candle gaps up, suggesting initial optimism, but closes lower, indicating that sellers are stepping in.
3. The third candle gaps up again but fails to hold gains and closes within the first candle’s body, showing that buyers have lost control.

The repeated failure to sustain new highs suggests that the uptrend is weakening and that a reversal may be near.

Market Conditions

The Upside Gap Two Crows pattern is most effective at the top of a strong uptrend. It works best when appearing near resistance levels or after a prolonged bullish move where buyers may be overextended.

Volatility Considerations

• In high volatility markets, false signals are more common, so traders should confirm the pattern with volume analysis or additional technical indicators.

• In low volatility markets, this pattern is more reliable, as price action tends to be smoother and follow-through is more consistent.

• Stop-loss placement: Above the high of the second or third candle to limit risk.
• Entry strategy: Enter after the third candle closes or on a slight retracement back toward resistance.
• Profit targets: Aim for previous support levels or use a risk-reward ratio of at least 2:1.

• Third candle fails to close within the first candle’s body – This weakens the pattern and may indicate continued bullish momentum.
• Low volume on the third candle – Weak selling pressure reduces reliability.
• Price reverses immediately after a breakdown – If the market bounces back strongly, the pattern may have produced a false signal.

To incorporate this pattern into a trading system, traders can:

1. Identify an existing uptrend before the pattern appears.
2. Confirm the three-candle structure, ensuring the second and third candles gap up and then fail.
3. Use additional confirmation from indicators like RSI, MACD, or moving averages.
4. Set stop-losses above the second candle’s high.
5. Test performance on different markets and timeframes before applying in live trading.

Below is a simple Amibroker AFL script to detect the Upside Gap Two Crows pattern:

// Upside Gap Two Crows AFL Code for Amibroker

_SECTION_BEGIN(“Upside Gap Two Crows”);

 FirstBullish = Ref(Close, -2) > Ref(Open, -2);

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

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

 UpsideGapTwoCrows = FirstBullish AND SecondGapUpBearish AND ThirdGapUpBearish;

 PlotShapes(IIf(UpsideGapTwoCrows, shapeDownArrow, shapeNone), colorRed, 0, High);

 _SECTION_END();

 This script helps traders spot Upside Gap Two Crows formations on stock charts.

The Upside Gap Two Crows candlestick pattern is a bearish reversal pattern, showing buyers are losing momentum. 

It consists of three candlesticks: the first is bullish, the second gaps up but closes lower, and the third fails to continue higher and closes within the first candle’s body.

This pattern is best used in an uptrend and should always be confirmed with other technical analysis indicators before trading decisions.

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