Upside Gap Two Crows (Temporarily translated: gap increases and 2 crows) is a cluster of 3 reversing candles. This pattern shows the buyers' continuous inability to try to continue the uptrend. Although seldom seen on charts, when these two crows appear, they give a very reliable bearish signal. In this article, we will show you how to identify and trade the Upside Gap Two Crows pattern with real examples.
What is Upside Gap Two Crows?
Upside Gap Two Crows are a reversal pattern consisting of 3 candles with the characteristic gap appearing in 2 bearish candles (such as 2 black crows). The pattern starts with a bullish candle, followed by two falling candles above as shown. This model rarely appears in the market because it is quite special as well as quite strict identification features.
Features of Upside Gap Two Crows
Here are the identifying characteristics of the Upside Gap Two Crows model:
- Appears in an uptrend because this is a reversal pattern from up to down.
- The first day is a long body day bullish candle
- The second day appears after a rising gap (gap gap) and is a bearish candle
- The opening price of the third day must be higher than the opening of the second day, and the closing price of the third day must be lower than the second day.
- However, the third day candlestick must close above the close of the first long bullish candle.
The important thing to remember about the Upside Gap Two Crows is that the first day must be long and the third day must engulf (cover) the second day. If there is a bearish candle then confirm a reversal.
Psychological evolution of the Upside Gap Two Crows model
Like many other bearish reversals, the bulls initially tried to push prices very high, creating a long body candle. Not stopping there, the price also created a gap to increase when opening the next session. It seems the current buying force is very strong.
But it is worth noting that the price could not break out but had to lower and close below to form a red candle. It was a bit disappointing, but the situation was okay because the price still closed above the first candle, the buyers were still profitable.
In the third session, the price suddenly jumped again, but the outcome was no better when the seller pushed down, even further in the previous session.
The buyer is hopeful and then disappointed, then there is more hope but more disappointment. In the end, they were exhausted and gave up, those who held the position of taking more profit or switched to the sell side and triggered a bearish wave.
Guide to trading with Upside Gap Two Crows model
This is a reversal pattern from up to down, so we will enter a sell (sell / short). Upside Gap Two Crows are highly reliable so you can enter the order as soon as the 3rd candle closes. If you want to be safer, you can wait for a fourth lower candle to confirm a reversal.
Stop loss should be placed a few pips from the top of the pattern and profit taking should be approximately 2-3 times the stop loss
Actual example of the Upside Gap Two Crows model
Here is one of the very few examples of Upside Gap Two Crows model in the financial market. The pattern appears in the daily chart of Apple company stock (AAPL), marked in blue. The first day, the price rose sharply and created a long white body candle. On the second day, the price jumped up and formed a Shooting Star candle, which is also a single bearish candlestick pattern. Finally, the pattern is complete when the third day's candle opens above but plummets, engulfing the body of the previous Sao. Apple stock then dropped to the previous accumulation area before rebounding.
We have just introduced you to the concept, characteristics as well as trading, with an example of the Upside Gap Two Crows candlestick pattern. Hope you know how to identify and use these two patterns. Good luck!
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Author: Tin Nguyen
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