Japanese Candlestick Trading: Bearish Upside Gap Two Crows Pattern

Japanese Candlestick Trading: Bearish Upside Gap Two Crows Pattern

On December 2, 2009, In Japanese Candlestick Patterns, Stock Screens, Technical Analysis, by Steve Warshaw

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This is the second screen in the series: Japanese Candlestick Trading: Stock Screens for 15 Candlestick Patterns

Signal Type: Reversal
Bias: Bearish
Inbound Trend: Bullish
Reliability: 7.5 of 10
Candlesticks in Pattern: 3

Pattern Definition:

Found during a bullish trend, the Bearish Upside Gap Two Crows pattern consists of three-candlesticks, is a type of exhaustion gap, and signals a possible top in the current market. Characterized by a long white candlestick followed by a black candlestick whose real body gaps above the first candlestick. The 3^rd day also gaps above the 2nd days close, but closes below the second days low, engulfing the second candlestick.

Psychology

As prices rise during a bullish trend, buying pressure reaches a frenzied. A strong up day is followed by a gap at the open. Profit taking quickly ensues, halting the bullish trend. The bears end up winning the day, however the bulls continue to be bullish as the close was still above the previous days close, and usually above the high as well. Bearish sentiment strengthens as the third day hits another new high, but closes below the second day’s close, a clear indication the bullish trend is weakening.

Criteria That Supports

Any divergence in the MACD
If during the fourth trading session, prices fail to set new highs, lower prices would be expected
if the gap between days 1 and 2 is filled, lower prices would be expected.

Running The Stock Screen

This stock screen uses stockfetcher.com SF2.0. If you are unfamiliar with StockFetcher.com, please watch this video to learn how to execute the stock screen.

set{body_bottom,min(open,close)}
set{body_top,max(open,close)}
set{lshadowsize, body_bottom – low}
set{tshadowsize, high – body_top}
set{tshadowsize2, tshadowsize * 2}
set{body_size, body_top minus body_bottom}
show stocks where MA(30) has been above MA(200) for at least 30 days
and body_size 2 days ago is 50% greater than CMA(body_size,30)
and Close-to-open Gap 1 day ago is above 0
and close 1 day ago is below open 1 day ago
and open is above body_top 1 day ago
and close is below open
and close is below body_bottom 1 day ago
and close is above close 2 days ago