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Upside-Gap Two Crows

Master the Upside-Gap Two Crows, a rare bearish reversal pattern occurring in an uptrend, signaling selling pressure is absorbing bullish momentum.

advanced level12 min read

Interactive Model

Interactive Visual Walkthrough

Upside-Gap Two Crows Reversal

Step 1 of 4
Strong Bullish Trend

Price climbs from $100 to $109 over Day 1 and Day 2, forming a long bullish candle on Day 2.

Why it matters: This pattern requires a prior strong uptrend to establish buyer overconfidence.

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 but closes above the first day's close. It signals that buying pressure is exhausting.

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 small bearish (red) candle that opens with a gap above the real body of the first candle.
  4. Third Candle (Second Crow): A bearish (red) candle that opens inside the real body of the second candle, engulfs its body, and closes lower (but still above the closing price of the first candle).

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.

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

[!WARNING]

  • Trading in Downtrends: Forcing this pattern in a downtrendDowntrendA market direction characterized by a sequence of lower highs and lower lows.Read full glossary entry →. A bearish reversal pattern requires an existing uptrend to reverse.
  • Confusing with Three Black Crows: The third candle of the Upside-Gap Two Crows does not close inside the first candle's body. If it closes below the first candle's open, it is a different pattern.
  • Ignoring VolumeVolumeThe total number of shares, contracts, or units of a security traded during a specified time period.Read full glossary entry →: Entering the trade when the bearish candles have very thin volumeVolumeThe total number of shares, contracts, or units of a security traded during a specified time period.Read full glossary entry →. Reversals require heavy selling volume to confirm institutional distribution.

Key Takeaways

  • •The Upside-Gap Two Crows is a three-candle bearish reversal pattern occurring in an uptrend.
  • •The first candle must be a long, bullish (green) candle.
  • •The second candle must be a small bearish (red) candle that gaps up above the first candle's body.
  • •The third candle is another bearish (red) candle that opens inside the second body and engulfs it, closing above the first close.
  • •Despite the name, it is a bearish reversal signal indicating buyer exhaustion.
Knowledge CheckQuestion 1 of 5

Despite being placed under Pro Bullish Patterns in the curriculum, what is the technical market bias of the Upside-Gap Two Crows?

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