Upside Gap Two Crows
The upside gap two crows pattern is a three-day candlestick chart formation that signals an upward price move may be running out of momentum and could reverse lower. Since the pattern involves three specific candles in a certain order, the pattern is not very common.
Upward Gap Two Crows
Definition
The Upward Gap Two Crows pattern is a three-day candlestick pattern that indicates the upward price momentum may have been exhausted and a downward reversal could be imminent. This pattern is not common as it involves three specific candlesticks arranged in a particular order.
Origin
Candlestick charting techniques originated in Japan, first used by rice traders in the 17th century to record and predict rice price fluctuations. The Upward Gap Two Crows pattern, as a complex candlestick pattern, has been gradually adopted and applied by Western investors with the popularization of technical analysis.
Categories and Characteristics
The Upward Gap Two Crows pattern consists of the following three candlesticks:
- Day 1: A long bullish candlestick indicating a strong upward trend.
- Day 2: A gap up opening, forming a small-bodied candlestick (can be bullish or bearish), showing market hesitation.
- Day 3: A long bearish candlestick, with the price falling back to near the opening price of Day 1, indicating the exhaustion of upward momentum and a possible reversal.
The characteristics of this pattern are the gap up on the second day and the strong decline on the third day, showing a sharp change in market sentiment.
Specific Cases
Case 1: Suppose a stock forms a long bullish candlestick on Day 1, gaps up on Day 2 but forms a small-bodied candlestick, and then significantly declines on Day 3, returning to near the opening price of Day 1. In this case, investors might believe the upward trend has ended and consider selling the stock.
Case 2: In the forex market, a currency pair rises significantly on Day 1, gaps up on Day 2 but shows little movement, and then declines sharply on Day 3, returning to near the opening price of Day 1. This pattern might indicate that the upward trend of the currency pair has ended, and investors might consider shorting it.
Common Questions
1. Is this pattern frequently seen?
No, it is not. The Upward Gap Two Crows pattern is not common as it requires three specific candlesticks to be arranged in a particular order.
2. How to confirm the validity of this pattern?
Investors usually combine other technical indicators, such as volume, Relative Strength Index (RSI), etc., to confirm the validity of this pattern.
