What is Sanba Karasu? The meaning of chart patterns and points that beginners should pay attention to

[Summary]

The three-winged crow is one of the typical candlestick patterns used in market analysis.

Generally, three consecutive dark lines are seen as indicating increasing selling pressure or a shift to a downtrend.

However, just because the three crows appear does not necessarily mean that the stock price will fall.

The important thing is not to judge only by the shape of the chart.

• Did it come out after a bull market?
• Is trading volume increasing?
• Are there any changes in performance or materials?
• Are you a short-term buyer or a long-term investor?

When viewed in conjunction with this background, the Three Crows becomes easier to use as a check sign for risk management, rather than as a signal to decide whether to buy or sell.

What is Sanba Karasu?

Three Crows is a pattern in which three consecutive dark lines appear on a stock price chart.

As an image, the flow is as follows.

• 1st: A big drop
• 2nd line: further decline
• 3rd: Continuous decline

It is called ``Three Crows'' because it resembles three black crows taking flight.

On a candlestick, a dark line represents that the closing price of the period was lower than the opening price. In other words, three consecutive dark lines indicate that selling was dominant over a period of time.

Characteristics of Sanba Karasu

The shape that is generally considered to be a three-winged crow has the following characteristics:

A simple image is as follows.

1st 2nd 3rd
  │      │      │
  █      │      │
  █      █      │
  █      █      █
  │      █      █
         │      █
                │

It doesn't have to be exactly like this.

However, we will see if selling becomes dominant for three consecutive stocks and the price is lowered. If there is a sudden increase in trading volume in the third session, we would like to determine whether there has been a fire sale or a new sell.

Why are the three crows attracting attention?

The reason why the Three Crows attracts attention is because it easily represents changes in investor sentiment.

In a bull market, many investors are bullish.

If you buy it, it will go up
It's still going up
Buy when there's a push

If this kind of atmosphere continues and three large dark lines suddenly appear in a row, the market outlook will begin to change. At the very least, the premise of "buying when there is a push" will be put to the test once.

The following may be behind the scenes.

• Profit-taking sales are increasing
• New purchases are weak
• People are starting to become aware of bad factors.
• Short-term selling is strong

In other words, the three crows are not just a candlestick shape, but a sign that ``buyer momentum may be weakening and sellers may be starting to gain the upper hand.'' The higher the price range, the more important the meaning becomes.

How to use Sanba Karasu

1. Used to confirm trend reversal

When the Three Crows appear after a bullish market, it can signal a turn to a bearish trend.

Be especially careful in the following situations.

• Stock prices are in the high range
• A sharp rise is followed by a large negative line.
• It is falling along with the trading volume.
• Sold after settlement and materials

However, it is dangerous to make buying and selling decisions based on the three crows alone.

We also check trading volume, moving averages, financial results, business forecasts, and overall market sentiment. Judgment will depend on whether only the chart is bad or whether the fundamentals are also bad.

2. Use it as a trigger for risk management

The Three Crows can be used as an opportunity to review your holdings and positions.

For example, check the following:

• Are you holding too large a position?
• Have you decided on a stop-loss line?
• Are you using too much margin trading or leverage?
• Are you taking too much risk before financial results or important events?

Three crows is not a "must sell" sign.

Rather, it is more practical to use it as an alarm to check risks. This will give you an opportunity to reconsider whether your reasons for holding the stock are intact or whether your position is too large.

3. Long-term investors don't overreact.

When investing for the long term, it is important not to buy or sell solely based on short-term chart patterns.

If the corporate value has not changed, even if the three crows appear, it may not have much meaning from a long-term perspective.

For example:

• Business is going well
• Financially sound
• Long-term growth story remains intact
• Only stock prices are adjusting in the short term.

In this case, the three crows may not be a reason to sell, but rather an indicator to carefully consider the timing of additional purchases.

Three Crows and other candlestick patterns

The Three Crows is a typical candlestick pattern that indicates selling dominance.

The meaning is easier to understand when compared to other patterns.

However, no pattern can stand alone.

Chart patterns are auxiliary lines for reading market conditions.

Mistakes that beginners often make

Think of the three crows as a ``definitely a crash''

The most common misconception is that if the Three Crows appear, there will always be a crash.

In the actual market, a short-term rebound may occur after the Three Crows. Sometimes it just ends up being a profit-taking sale.

Chart patterns are a matter of probability and do not determine the future.

View only the chart

In addition to charts, the following factors are also important when making investment decisions:

• Achievements
• financial situation
• Financial details
• interest rate environment
• exchange
• economic trends
• Overall market risk tolerance

Even if there are three crows, if business performance has improved significantly, the decline may be a short-term adjustment in supply and demand.

On the other hand, if three crows appear at the same time as a deterioration in performance or a downward revision, the level of caution will increase.

sell emotionally

When I see three crows, I tend to feel anxious.

But buying and selling based on emotion leads to common mistakes.

buy impatiently when the price is rising
Get scared and sell when the price is going down.

If you repeat this, you will likely end up buying at a high price and selling at a low price.

The important thing is not to panic after looking at the chart.

Decide on your trading rules in advance.

practice framework

Once you find the Three Crows, it will be easier to organize them if you check them in the following order.

1. Is it coming after a bull market?
2. Is trading volume increasing?
3. Are there any changes in financial results or materials?
4. Is it breaking the moving average or support line?
5. Are you a short-term buyer or a long-term investor?
6. Does it match the pre-determined trading rules?

What is more important is the background than the Three Crows themselves.

Even though it is the same three crows, the meaning changes depending on whether it appears with high trading volume in a high price range or if it appears temporarily in the middle of a long-term uptrend.

Summary

The Three Crows is a typical candlestick pattern that indicates increasing selling pressure.

The points are as follows.

• Consists of three consecutive hidden lines
• May signal a shift to a downtrend
• Do not make buying or selling decisions alone
• Also check trading volume, performance, and market environment.
• Use as a sign of risk management

Beginners should not think mechanically, ``I'll sell it because I get three ravens.''

Rather,

Why are sales increasing?

It is important to have a habit of thinking about this.

Charts are not tools for predicting the future.

Be aware of market changes and use it as a tool to manage your own risk. If you look at it from this distance, you will be less likely to be swayed by the three crows.