Upside-Gap Two Crows

What is an Upside-Gap Two Crows Pattern?

The Upside-GapGapAn area on a chart where no trading activity took place, visible as an empty space between two consecutive candles.Read full glossary entry → Two Crows is a three-candle bearish reversal pattern that occurs within an established uptrendUptrendA market direction characterized by a sequence of higher highs and higher lows.Read full glossary entry →. It is characterized by a long bullish candle, followed by a gapGapAn area on a chart where no trading activity took place, visible as an empty space between two consecutive candles.Read full glossary entry → up into a small bearish candle, and completed by a second bearish candle that engulfs the first bearish candle. It signals that buying pressure is exhausting. This is a Deadly reversal pattern for investors and swing traders

Pattern Structure

To identify a valid Upside-Gap Two Crows:

1. Prior UptrendUptrendA market direction characterized by a sequence of higher highs and higher lows.Read full glossary entry →: The market must be in an established upward trendTrendThe general direction in which a security or market is moving over time.Read full glossary entry →.
2. First Candle: A long bullish (green) candle.
3. Second Candle (First Crow): A healthy bearish (red) candle that opens with a gap above the real body of the first candle.
4. Third Candle (Second Crow): A healthy bearish (red) candle that engulfs the entire second candle and closes lower.

Market Psychology

• Bullish Climax: A long green candle shows buyers are in complete control. The next session gaps up, showing extreme buying enthusiasm.
• The First ResistanceResistanceA price level where selling pressure is strong enough to prevent the price from rising further. It represents a "ceiling" on the chart.Read full glossary entry →: Sellers enter, preventing the price from expanding higher and forcing a minor red close.
• The Trap: The next session opens higher, but sellers step in aggressively. They drive the price down, completely engulfing the previous day's red body. This reveals that the gap-up was a trap, and momentum has shifted to the sellers.

Trading Setup

• Entry: Short the asset upon the close of the third candle, or wait for the fourth candle to break below the low of the third candle to confirm the reversal.
• Stop-Loss: Place the stop-loss orderStop-Loss OrderAn order placed with a broker to sell an asset when it reaches a specific price, designed to limit a trader's loss on a position.Read full glossary entry → above the highest point of the pattern (usually the high of the first or second crow).
• Take Profit: Target key supportSupportA price level where buying pressure is strong enough to prevent the price from falling further. It represents a "floor" on the chart.Read full glossary entry → levels or swing lows below the structure.
• Exit previous buy positions: Any previous buy positions should be squared off as this patterns suggests an end of an uptrend

Confirmation Rules

• The body of the second candle must remain entirely above the body of the first candle.
• The third candle must engulf the second candle's body.
• A fourth bearish candle closing below the first candle's close validates the structural shift.

Common Mistakes