If you love reading books or articles about trading, maybe you are already familiar with the three black crows.
And what is always said is that it is a bearish reversal candlestick. But what they do not know, it can also be used as a bullish reversal candlestick.
In this article, we will find out why it is not only for bearish reversal, and it is also possible for bullish reversal.
So what is three black crows?
It consists of three consecutive bearish candles downwards, and we see almost no wick on it, normally its body is longer.
The normal reaction of a trader, who has little knowledge of candlestick formation when they see it on the chart.
This is bearish signal and I will go ahead and short it.
Well, that is not a really good idea.
Why?
What if three black crows formed near a major support level? Are you still going to short it?
It is still more important to look at the overall market context than to make our decision on candlestick alone.
Let say for example, the market experienced a long time during the downtrend and it formed three black crows near a major support level. It has a higher chance of bouncing and having a reversal than it will continue to descend.
But if you really want to shorten this scenario, you can, you just need to wait for the support to be broken and act as a resistance.
The point is, three black crows do not always mean bearish reversal. It depends on the position in which the candlestick is located.
Uptrend
We can enter a long position when the three black crows are positioned near support levels, trendline fibonacci levels.
This is best done when the market is above the 200 Moving average, just to make sure the market is uptrend.
If we take a closer look at the example image above, although, we will see multiple three black crows that most say are bearish signals. And if you are obedient and you will put a short position here.
Good luck!
So it is very important to look first at where the three black crows are located.
If you know the uptrend of the market trend, you should always look for a long position.
Downtrend
Here we can enter a short position, if the three black crows are positioned near the resistance levels, trendline or fibonacci levels. The market should be in a downtrend, or the price action is below the 200 Moving average.
See how to reject the price when it hits the resistance level in the example image above. It formed three black crows that resulted in the down trend of the market, if we see this in the market where we tetrade, we can consider a short position.
Just remember we need to be in the downtrend market.
Take note, this strategy is better used in the trending market, and not so good in trading ranges market.
Like other chart patterns and trading strategies it works better in a higher time frame, but can also be used intraday.