What is the Three Black Crows model?
1) What is Three Black Crows?
The Three Black Crows candlestick model usually appears after an uptrend session, consisting of a group of three bearish candles predicting an uptrend turnaround. Each candle in the pattern has a closing price which is near or equal to the lowest price of that candle. While the opening price of each candle in the pattern is inside the previous body. Frequently, traders manipulate this signal in combination with other technical signals or chart patterns to confirm the reversal of an uptrend.
2) What Three Black Crows model tell you?
The Three Black Crows is a model you can identify it without using any particular calculations. The pattern of Three Black Crows occurs when bears overwhelm the bulls for three consecutive trading sessions. The model shown on the price chart is three long bearish candlesticks with a short shadow or no shadow.
The typical pattern of Three Black Crows is when the bulls start the session with a slightly higher opening price than the previous closing price; however, the price is pushed lower during the session. In the end, the price will close near or equal to the lowest price of the session, under the strong pressure from the bears. Traders often regard this pattern with the beginning of a downtrend.
3) How to use the Three Black Crows model?
As a visible model, you should use Three Black Crows as a method of confirmation for other technical indicators. For example, RSI has been in overbought status for a long time, then the pattern appeared and the RSI rate got over 50 as well. This is the sign of trend reversal.
The Three Black Crows model is in the most ideal condition is when the bearish candlesticks are relatively long. It closes near or equal to the low price of the session. If the shadows are stretched out, it could be due to some profit-taking of some investors, then the uptrend will be confirmed again.
4) The Three Black Crows vs. the Three White Soldiers
In contrast to the model of Three Black Crows, the Three White Soldiers model occurs at the end of the downtrend and predicts the possibility of the downtrend revival. This model appears in the form of three long bullish candlesticks, each of them has an opening price within the previous body and closes to its highest price.
5) The disadvantages
The model of the Three Black Crows performs a strong decline in prices, so the traders should look at shorter time frames and the technical indicators will show that oversold could lead to correction before the downtrend resumes. The best way to recognize when an asset is oversold is to use the Relative Strength Index (RSI). When the indicator goes past 30, it indicates that the asset has been overcharged. However, you have to consider the divergence of this indicator more.
Moreover, many traders usually look at candlestick patterns or other technical indicators to see price action instead of using the Three Black Crow model. This model is frequently used to identify trends rather than to identify the entry points, so you should use it in conjunction with other indicators to get the most optimal entry points.
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