Upside gap two crows

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The setup known as upside gap two crows is referred to the gap occurring between a small black candle and the preceding candle which is usually a long white candle. The two black candles forming the pattern are the two crows which “look down from the branch of a tree menacing the market”. The second black candle, with an open value which is greater than previous candle open and a close which is smaller than the preceding candle close, fully engulfs the first black candle, remarking the strength of the bearish signal.

Upside gap.jpg

The main pattern features are:

  1. The first candle is a long white candle;
  2. There is a gap between the first candle and the second candle;
  3. The third candle opens above the second candle open and it closes under the previous close, engulfing the second candle;
  4. The third candle close is above the white long candle’s close.

The rationale behind this pattern lies in the progressive uncertainty of buyers who have been driving the market up; the first black candle with a small range provides us a first indecision signal that doesn’t scare too much the bulls, since it makes a higher close than the previous session’s close. The second black candle instead, even if it opens with a new high, brings the price under the first black candle close, creating strong doubts for the bullish side of the market.

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