The three black crows candle formation does not happen very frequently in stock trading, but when it does occur swing traders should be very alert to the crow’s caw.
The candlestick pattern’s metaphor is three crows sitting in a tall three. Essentially, it is a reversal formation that occurs following a strong advance.
On the day the first black crow makes its appearance, the formation is most predictive if the first “crow” — or dark candlestick — closes below the white candle’s real body. That is the first step in setting up a Minor trend reversal — where today’s high is lower than yesterday’s high and today’s low is below yesterday’s low.
Two more long-bodied consecutive down days then ensue. On each of these days, it appears as if the stock wants to regain its former strength, as the stock opens higher than on the previous day. By the end of each session, however, the sellers regain control and the stock drops to a new closing low. Here is what three black crows candlestick pattern looks like: