Reversing candles. Three black crows. Exhibit 13.0 The three black crows pattern

Transcription

1 Three black crows

2 Reversing candles Three black crows Exhibit 13.0 The three black crows pattern The pattern of upside gap two crows has two black candles gap upon the previous bullish real body. The three black crows is different, it has 3 black little candlestick, the first candlestick form within the range of the previous green session. The second and third candlestick should ideally open within the previous day s range. If one of the next candlestick of the three black crows close beyond the high of the previous one (Exhibit 13.0), then the whole trend will set back to bullish or neutral, otherwise it should presage continuous downtrend.

3 Exhibit 13.1 Seal, Daily. Perfect formation of three crows pattern might be rare, but the main functioning part of the pattern is the three crows that overlap with each other, in spite of the absence of the bullish candlestick, the three crows are also serving the purpose. Exhibit 13.1 gives an example of how it works. At June 2013, in seal daily chart, that was a formation of three crows after a one-day bullish candlestick, although the first day red candlestick didn t open within the real body, but it did open in its trading range, and this formation did bring down the price for about 12%. Exhibit 13.2 Maybank, Daily.

4 In Maybank chart, as shown in exhibit 13.2, the overlapping three crows formation succeeded to press the price all the way down, the first red candlestick open at high, not following the formation rule of three crows pattern, but the four red crows itself is already supple to bring in the forecast. In Japanese candlesticks charting techniques, it is not a charting technique that requires the chartist to follow all the rules tight, but using the techniques flexibly may yield better results and signal more sensitive forecast on the trading. Exhibit 13.1 The three crows pattern voided. Traders need to keep in mind that, cut loss strategy is important for trading in the stock market, in this example, when the third red candlestick is the green one, which might imply the formation failure of three crows pattern, if a traders buy into this signal, but unfortunately in the following day, the trends turns back downward, then the trader should need to cut loss base on the pre-determined cut loss target. It s common to see the rebound occurs after three red candlesticks, this formation is quite frequently seen but, there s a simple rule to get rid of this confusing. Whenever the next bearish candlestick in the formation closes higher than previous open price, this should be bullish or at least a pause signal for the bear.

5 Bullish candlesticks close higher than previous high will void the formation Exhibit 13.1 Benalec, Daily. Take a look on Benalec daily chart in 2011, On March there s a formation of three crows pattern over the four days trending, the fourth day shows that the three crows pattern is valid but when the investors are preparing to cover their position, on the fifth day, there s a green candlesticks gap up and close higher than the previous candlestick. As mentioned, a situation like this will void the three crows formation, and as you can see, the price suddenly soar after the failure of three crows pattern and did not comes lower than the three crow formation level. Psychology Behind The core functioning characteristic of three crows formation is its arrangement of three crows, which open higher and close lower to the previous range. The opening of the trade is a gap high, giving a strong begin but ultimately, the strength cannot hold, it close lower, and this continue for 3 session in a streaks, this clearly shows us the moody feel of the market. The high opening and low closing formations by the three crows are beating off the hope of the buyers, creating more negative sentiments in the market afterwards.

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