Thomas Bulkowski’s successful investment activities allowed him to retire at age 36. He is an internationally known author and trader with 30 years of stock market experience and widely regarded as a leading expert on chart patterns. His four books, including the best selling Encyclopedia of Chart Patterns, have been translated into seven languages. He may be reached at

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Bulkowski's Upside Gap Two Crows

Market

Industrials (^DJI):

Transports (^DJT):

Utilities (^DJU):

Nasdaq (^IXIC):

S&P 500 (^GSPC):

As of 02/07/2012

12,878 33.07 0.3%

5,323 -10.92 -0.2%

452 2.11 0.5%

2,904 2.09 0.1%

1,347 2.72 0.2%

YTD

5.4%

6.0%

-2.7%

11.5%

7.1%

Tom's Targets Overview: 02/03/2012

13,100 or 12,400 by 02/15/2012

5,500 or 5,150 by 02/15/2012

470 or 440 by 02/15/2012

3,100 or 2,800 by 02/15/2012

1,375 or 1,300 by 02/15/2012

Test Portfolios and CPI

Indus. strength: 2.4%

Mutt Losers: None YTD

Mutt Winners: 2.5%

Wilder RSI: None YTD

CPI:

on 12/20/2011

In my book, Encyclopedia of Candlestick Charts, pictured on the right, I explore the entire range of candlestick patterns from abandoned babies to windows (not exactly A to Z, but you get the idea), in both bull and bear markets, using almost 5 million candle lines in the tests.

The book takes an in-depth look at 103 candlestick patterns and reports on behavior and rank (3 types: reversal rate, frequency, and overall performance), identification guidelines, performance statistics (tables of general statistics, height, and volume), trading tactics (tables of statistics on reversal rates and performance indicators), and wraps each chapter with a sample trade. I share a sliver of that information below. If you like what you read here, then you will love the book. Help support this website and buy a copy by clicking on the above link.

The upside gap two crows candlestick pattern is supposed to be a bearish reversal, but testing shows it is a weak bullish continuation pattern. It has a frequency rank of 75 out of 103 patterns where 1 is the most popular. Thus, you should be able to find this pattern if you look hard enough, but why bother? The overall performance is well down the list, so it has no appeal unless you like losing money.

Important Results

Discussion

Identification Guidelines

Three Trading Tidbits

Example

Upside Gap Two Crows: Important Results

Theoretical performance: Bearish reversal

Tested performance: bullish continuation 60% of the time

Frequency rank: 75

Overall performance rank: 74

Best percentage meeting price target: 45% (bear market, down breakout)

Best average move in 10 days: -5.50% (bear market, down breakout)

Best 10-day performance rank: 22 (bull market, down breakout)

All ranks are out of 103 candlestick patterns with the top performer ranking 1. "Best" means the highest rated of the four combinations of bull/bear market, up/down breakouts.

The above numbers are based on hundreds of perfect trades. See the glossary for definitions.

Upside Gap Two Crows

Upside Gap Two Crows: Discussion

The upside gap two crows candlestick is supposed to be a bearish reversal, but testing shows that it acts as a bullish continuation 60% of the time. The overall performance rank is 74 where 1 is the best out of 103 candle types. Thus, it does not work as expected and when it does work the price move is often lousy.

The best average move 10 days after the breakout is a drop of 5.5% in a bear market. I consider moves of 6% or higher to be worthwhile, so this comes close. The best 10-day performance rank is 22 after a downward breakout in a bull market. However, the drop averages just 3.64%, so my guess is the bull market/down breakout combination is a weak category among all candlesticks.

Upside Gap Two Crows: Identification Guidelines

Characteristic	Discussion
Number of candle lines	Three.
Price trend leading to the pattern	Upward.
Configuration	Look for a tall white candle in an upward price trend. Then find a black candle with a body gapping above the prior candle's body. The last day is another black candle that engulfs the body of the middle day with a close that remains above the close of the first candle.

Upside Gap Two Crows: Three Trading Tidbits

If you want a few bones from my Encyclopedia of candlestick charts book, here are three to chew on. The pages refer to the book where the tips appear.

Upside gap two crows candles that appear within a third of the yearly high tend to act as continuations most often -- page 884.
Select tall candles for the best performance -- page 882.
Select upside gap two crows with breakouts that join the primary trend -- page 884.

Upside Gap Two Crows: Example

The upside gap two crows candlestick on the daily scale

The chart shows an upside gap two crows candle pattern circled in red on the daily scale. Price trends upward leading to the start of the candle. Then a tall white candle appears. The next day, a black candle gaps higher and the body remains above the white candle's body. The last day is a black candle that engulfs the body of the prior day. That means the top of the body is above the prior open and the bottom of the body is below the prior close.

This upside gap two crows candlestick appears in an upward price trend, and it has an upward breakout. Thus the candlestick is a bullish continuation of the primary trend.

I found that the best setups for this candle pattern are those in which the breakout direction joins the primary price trend. In this example, the primary trend is upward and so is the breakout. Downward primary trends with downward breakouts also do well, so look to trade those, too.

-- Thomas Bulkowski