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Upside Gap Two Crows Candlestick Pattern

bullish candle followed by a gap up and a small bearish candlestick and then a larger engulfing bearish candlestick

The upside-gap two crows is a three candlestick pattern that occurs in an uptrend and it suggests a reversal of prices downward. After an uptrend, the first candlestick is a long bullish candlestick. The second candlestick is a bearish one that gapped up from the close of the first day’s candlestick. The real body of the second day candlestick should be above the real body of the first day’s candlestick. The third candlestick is another bearish candle that gaps up from the close of the second day’s candlestick, but ends the day below the close of the second day’s candle. The third day candle’s real body essentially should engulf the real body of the second day’s real body.

Psychology of Upside Gap Two Crows

The psychology of the upside gap two crows is explained as follows: The first day bullish candlestick continues the uptrend higher. The second day of the upside gap two crows gapped up, having opened the day higher and having generally made a new high for the uptrend. However, prices closed the day lower, which is unexpected if bulls were still in control. Nevertheless, the bulls could take comfort since the second day still closed above the close of the first day. The third day is another attempt by the bulls to make a new high for the uptrend. The bulls gap up above the real body of the second day; however, this bullish sentiment is unable to hold and the bears push prices down below the real body of the second day. At this point, bulls should be worried because there have been two consecutive days of attempts at new highs that were rejected by bears. According to Nison (1991, p. 98), if the fourth day of prices fails to go higher, then a trader should expect lower prices ahead. Nison also suggests that if a trader goes short, then the trader should place a stop loss on the close above the second bearish candlestick’s high.

Upside-Gap Two Crows Candlestick Chart Example

candlestick chart of a top of the upside gap two crows

The chart above of the Silver ETF (SLV) is a good illustration of the upside-gap two crows candlestick pattern. The first day of the pattern is a bullish candlestick. The second day gapped up and was a small bearish candlestick where its real body was above the real body of the bullish candlestick. The third day of the pattern gapped up yet again, but bears pushed prices lower. The third day’s real body engulfed the second day’s real body. The fourth day failed to make a new high and suggested that the bull run was over and that prices should head lower, which they did the next day.

Works Referenced

  1. Kirkpatrick II, C.D., & Dahlquist, J.R. (2010). Technical Analysis: The Complete Resource for Financial Market Technicians (2nd ed.). Upper Saddle River, NJ: FT Press.
  2. Rockefeller, B. (2011). Technical Analysis For Dummies (2nd ed.). Hoboken: John Wiley & Sons.
  3. The Pattern Site. (2008). Bulkowski's Measure Rule. Retrieved June 1, 2012, from http://thepatternsite.com/measure.html