Understanding the Upside Gap Two Crows

What is the Upside Gap Two Crows?

The Upside Gap Two Crows is a bearish reversal pattern that appears in an uptrend and signifies a potential shift from bullish to bearish sentiment. It consists of two bearish candles that form gaps above the previous bullish candle and indicate a possible trend reversal.

How is the Upside Gap Two Crows Identified?

The Upside Gap Two Crows pattern is identified by:

1. First Candle: A strong bullish candle.
2. Second Candle: A bearish candle that opens above the high of the first candle (creating an upside gap) and closes within the body of the first candle.
3. Third Candle: Another bearish candle that opens within the body of the second candle and closes lower, confirming the bearish reversal.

When to Use the Upside Gap Two Crows

The Upside Gap Two Crows pattern is used to:

• Identify Potential Reversals: Spot bearish reversals in an uptrend when the market shows signs of weakness.
• Evaluate Market Sentiment: Assess the strength of the reversal based on the gap and the confirmation of the pattern.
• Adjust Trading Strategies: Adapt trading strategies to capitalize on the anticipated bearish shift.

Formula Example

To identify the Upside Gap Two Crows pattern:

1. Uptrend Scenario:
   • First Candle: Strong bullish candle.
   • Second Candle: Opens above the close of the first candle (upside gap) and closes within its body.
   • Third Candle: Opens within the body of the second candle and closes lower.

For example:

• A strong bullish candle is followed by a bearish candle that opens above the high of the first candle (creating a gap) and closes within the body of the first candle. A second bearish candle that opens within the body of the previous bearish candle and closes lower confirms the pattern.

Parameters

The parameters for identifying the Upside Gap Two Crows pattern include:

• Data: Defines the type of data to use for the pattern.

  • Value: ohlc
  • Description: The pattern uses Open, High, Low, and Close prices.

• Previous N Candles: Number of preceding candles to check.

  • Default Value: 1
  • Min Value: 1
  • Max Value: 300
  • Description: Checks for the Upside Gap Two Crows pattern in the last N candles.

Conclusion

The Upside Gap Two Crows pattern is a significant bearish reversal indicator that can help traders anticipate a shift in market direction. By recognizing this pattern, traders can make informed decisions about potential bearish reversals and adjust their trading strategies to manage risk and capitalize on market changes.