If you already know the effectiveness of the Three Crows candlestick pattern, the Upside Gap Two Crows that I am about to introduce will surprise you more with its accuracy. Although it was rarely seen on Japanese candlestick charts, the Upside Gap Two Crows pattern gives us a very reliable bearish signal. In this article, I will show you how to identify and trade this candlestick pattern.
What is Upside Gap Two Crows pattern?
Upside Gap Two Crows pattern is a cluster of 3 candlesticks that appear when the price is in an uptrend. It signals that the price is about to reverse from bullish to bearish correctly. They include the following ones.
1st candlestick is bullish and strong.
2nd candlestick is a bearish one with a bullish gap above the 1st. The body of the 2nd must be above the body of the 1st.
3rd candlestick is also bearish with a gap above the 2nd one. But the closing price is below the 2nd. At the same time, the body of the 3rd must engulf the real body of the candlestick 2.
The important thing to remember in Upside Gap Two Crows is that the first candlestick must be long and the third one must engulf (cover) the second. This pattern, although rarely appears, has a high accuracy rate of nearly 90%.
Psychological developments of the Upside Gap Two Crows pattern
As with many bearish reversal patterns, the buyers initially try to pull the price very high, creating a bullish candlestick with a long body. Not stopping there, the price also creates a bullish gap in the next candlestick. It seems that the current buying force is very strong.
But it is worth noting that the price can’t break out further but has to drop and close to form a red candlestick. Although the buying power is not as strong as expected, the situation is still good. Since the price closes above the first candlestick anyway, the buyers still have the advantage.
On the 3rd candlestick, the price suddenly jumps up again. But the end is not better when the sellers push the price down sharply. It’s even further than the previous candlestick.
It suggests that long holders decide to take profits and turn to bears and trigger a bear market.
How to trade with Upside Gap Two Crows candlestick pattern
Upside Gap Two Crows is a reversal candlestick pattern from bullish to bearish. So we will enter a bearish order after the 3rd candlestick closes. If you want a high level of security, wait for the 4th candlestick to drop to make sure the bear market has started.
It can be combined with the RSI indicator to safely execute a bearish order in the overbought zone.
This Upside Gap Two Crows candlestick pattern rarely appears in the market because of its quite distinctive as well as rigorous identifying characteristics. But every time it is formed, it will be an opportunity to make huge profits for investors. After reading this article, you need to understand the characteristics and how to enter an order with this pattern. Good luck and happy trading.
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