Upside Gap Two Crows
Candlefocus EditorTo start, an uptrend should be present before the Upside Gap Two Crows pattern can be identified and confirmed. The pattern is formed by means of a three-candle sequence, in which the first candle is a long up candle followed by a gap higher into a down candle and then a larger down candle that completely engulfs the prior.
This reversal pattern is important to look out for because, instead of immediately turning lower or continuing the uptrend, the market could either shift into a sideways range or rally higher instead. As such, some traders wait for confirmation before acting by waiting for the price to fall below the low of the third candle before entering a short or a sell position.
Although traders rely heavily on these technical analysis tools, caution should still be taken as the confirmation of the pattern does not always guarantee an imminent change in direction. Furthermore, an Upside Gap Two Crows pattern can be more reliable when found after a long-term trend that has experienced several breaks of a prior support level.
Overall, the Upside Gap Two Crows pattern is a useful technical pattern for traders looking for a sign of a potential trend reversal. While there is no guarantee of a subsequent reversal, the pattern could be a significant sign that a trend reversal may be coming.