The three black crows candlestick pattern is a widely-used bearish reversal pattern widely used by traders who chart the price movement of their favorite stocks, indices, commodities and other tradable instruments. It is used to signal that the current uptrend is likely to reverse and a localized downtrend is likely to begin. Technical analysts often look to use the pattern alongside other indicators, such as the relative strength index (RSI), the volume of trading and any other technical indicators they have found to be reliable.

The three black crows pattern forms when three long bodies in a row – typically at or near the top of what appears to be an emerging uptrend. The bodies in the pattern can be black, red or some other combination of strong bearish closure. As well as a continued decrease in the closing levels of each consecutive trading period, the pattern features long upper and lower shadows. This shadowing indicates that the prior uptrend was weaker than was initially thought and that a reversal may be on the horizon.

It is important to remember that three black crows only signals the potential for a reversal – not a definite downturn. Consequently, when the pattern is observed, traders should always consult other indicators before making any trading decisions. For example, traders may also want to consider whether RSI is in oversold levels. This may be indicative of a potential retracement rather than a full reversal.

Traders should also be aware of the opposite pattern, known as three white soldiers. The three white soldiers pattern has the opposite effect of the three black crows: where three black crows suggest an impending trnedown, three white soldiers indicate that a current downtrend is set to reverse and an uptrend is likely to take its place.

The three black crows pattern is an extremely useful indicator to help traders anticipate when a current uptrend may reverse. Combining it with other technical indicators, such as RSI and volume of trading, can help traders make more informed decisions when it comes to trading. However, as with all trading strategies, it should always be combined with sound risk management in order to obtain optimal results.