Upside-Gap Two Crows Candle Pattern Explained

Upside-Gap Two Crows Candle Pattern Explained
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The Upside-Gap Two Crows Candle Pattern is a candle pattern formed by three candles and signals a potential reversal in the market. In this article we will show you how to identify them in the right market position with real chart examples.

The Upside-Gap Two Crows Candle Pattern is a three candle pattern which signals a potential reversal in the market. The Upside-Gap Two Crows Candle Pattern is bearish and should be identified as a signal when occurring in an up-trending market or at the top of a range.

Upside-Gap Two Crows Candle Pattern Criteria:

  • An up-side two crows gap refers to the gap between the real body of the small red (bearish) real body and the real body preceding it.
  • The real body which precedes the first red candlestick is usually a long green (bullish) one.
  • The two red (bearish) candle sticks are the “crows” in this pattern. They are like two black crows peering down from the tree branch (bearish candles are often drawn as black candles, hence the crow analogy).
  • An ideal upside-gap two crows has the second red real body opening above the first black real body’s open. It then closes under the first black candlestick’s close.

Additional notes:

This candle pattern is very rarely seen.

Quick Reference Guide – Candlestick Basics. If you need a reminder of what candlesticks are have a look at our free PDF – Candlesticks Explained.

The criteria and examples above are just the technical definitions of this pattern. However patterns are only useful with context and with real chart examples.

No pattern will ever exactly match the criteria and in order to be a useful signal must occur in the correct place in a trend. Let’s start by looking at the classification table for this pattern.

Upside-Gap Two Crows Candle Pattern Classification Table

Number of Candles In Pattern 3
Type: (Reversal/Continuation) Reversal
Bullish/Bearish/Indecision Bearish
Market Conditions: Range, Down-trend, Up-trend Up-trend, Range
Position: Top, Bottom, Range Top

What Price Action Does The Stalled Pattern Represent?

All candlestick patterns are formed by price action. But the popular ones represent price action that may have significance in signalling the direction of the market.

The Upside-Gap Two Crows Candle Pattern is defined by the two “Crows”, the first of which gaps up from a green bullish candle before stalling and then a second candle opening higher again and then also failing and closing down.

This initial bullish gap up followed by consecutive bearish candles can be seen as a potential signal that the bulls cannot extend the trend and a potential reversal is at hand.

As with all reversal patterns, these signals are better when seen after a sustained trend in one direction. The signal is best when formed in a trend but can also be valid when formed at the appropriate place in a ranging market.

Hint: It is always good practice to look for confirmation for any signal that you are looking to trade.

Upside-Gap Two Crows Pattern Example With Confirmation

In this example on the UK100 market the price action had been up-trending towards a key round level resistance area.

The market then formed an Upside-Gap Two Crows Pattern, signifying a loss of momentum. This along with the resistance level was too much for the market to break through and a reversal occurred.

Upside-Gap Two Crows Candle Pattern With Confirmation Example
Upside-Gap Two Crows Candle Pattern With Confirmation Example

Note: you can get a free round level indicator for MT4 from us here: Round Levels MT4 Indicator.

In What Market Conditions Does The Upside-Gap Two Crows Pattern Become A Signal?

To recap – the Upside-Gap Two Crows Pattern is a potential signal when occurring after a sustained and mature uptrend, especially at high levels.

As with any reversal signals it should be treated with caution and may be a better sign to cover longs rather than as a signal to short the market.

Let’s look at some more examples.

Upside-Gap Two Crows Candle Pattern In An Up-trending Market

An up-trending market is one where the price action generally moves down over time and is characterized by higher lows and higher highs.

Up-trending Market Example
Up-trending Market Example

In this UK100 market example the market was uptrending and then an Upside-Gap Two Crows Pattern formed.

The market then paused before selling off and reversing the trend.

Upside-Gap Two Crows Candle Pattern In An Up-trending Market Example
Upside-Gap Two Crows Candle Pattern In An Up-trending Market Example

Upside-Gap Two Crows Candle Pattern In A Ranging Market

A ranging market is one where the price action moves up and down between two sets of support and resistance. This is also known as a sideways, balancing or horizontal market. In essence the price action is struggling to break out of the range decisively either on the upside or downside.

Ranging Market Example
Ranging Market Example

Although not traditionally used as a signal in a ranging market, it can still be a useful tool to help define the top of a range or as a rejection of a breakout.

This is because the price action it represents (stalled momentum) is the type of signal that is useful to indicate that the market is less likely to break out of the range to new highs.

In the UK100 market example below you can see an example where the market was ranging and attempted a breakout.

However, an Upside-Gap Two Crows Pattern formed and signaled that the breakout lacked momentum. The market then reversed back to the range.

Upside-Gap Two Crows Candle Pattern In A Ranging Market Example
Upside-Gap Two Crows Candle Pattern In A Ranging Market Example

Candle Pattern MT4 Indicator Downloads

If you trade using MT4 then why not try out our free MT4 indicators? Most of our indicators, including the most common candle pattern indicators are Free and available for download here: MT4 Indicator Page.

Most of our candle indicators also have an alternate version which can show the signal in a separate indicator window of the chart if that is your preference.
For advanced users you can use our Pin Bar Pattern Manager (Paid) to specify your own parameters of candles you want to identify. You can find that here.

Important Information About Candlestick Patterns

Attribution:

All of the candlestick patterns that we explain on NothardTrading.com must be attributed to Steve Nison and his books on candle charting, the most famous of which was Japanese Candlestick Charting Techniques (Amazon). You can also find out more at his website here.

Interpretation Of Candle Patterns:

It is important to note that these patterns were originally identified on the daily timeframes of index charts, which is still where they are the most useful. However, this does not mean that they cannot be used for other markets or time frames.

No signal is perfect and should never be used as such. Any patterns that you identify only signals a potential move based on the fact that history repeats itself and forms regular patterns in similar situations.

But past performance is no guarantee of future results! So always treat these patterns with care and think of these guidelines when using them.

Best practice guide for trading of candle patterns:

  • No pattern is ever perfect. Be aware that patterns will form slightly differently each time and in different markets.
  • Use them as consistently as possible. Even though you will never find patterns exactly the same, you should always implement a consistent ruleset when identifying and using patterns.
  • It is never a guarantee, only an indication.
  • Make sure you are using it in the right context. For example if it is a continuation pattern then don’t use it to trade reversals!
  • Use multiple signals (confirmations) to have more confidence in your trading.

More About Candlestick Patterns

If you are interested in reading more about candlestick patterns you can find our articles on this topic here: https://www.nothardtrading.com/category/candle-patterns/ or choose a pattern below to read more. 

Justina Nothard

Justina Nothard

Hi, I’m Justina Nothard, a retail investor trading Stock Index Futures.

I understand how hard it can be for the ordinary trader to learn the basics and find useful tools and practical information.

This is why I decided to create Nothard Trading to help you take control of your trading.

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