Upside Gap Two Crows Pattern: A 2025 Guide for Australian Investors

For many Australian investors, 2025 has already been a year of volatility. As the ASX continues to ride the waves of global economic uncertainty and shifting domestic policies, technical analysis tools are more crucial than ever. One rare but potent signal on the charts is the Upside Gap Two Crows pattern—a bearish reversal formation that can warn of an impending downturn even in strong uptrends.

What Is the Upside Gap Two Crows Pattern?

The Upside Gap Two Crows is a three-candle pattern found in candlestick charting. It forms after a pronounced uptrend and is considered a bearish signal by technical traders. Here’s how it plays out:

• Candle 1: A long bullish (green) candle that confirms the ongoing uptrend.
• Candle 2: Another bullish candle that gaps up at the open, but closes higher than the previous close—suggesting continued enthusiasm.
• Candle 3: A bearish (red) candle that opens above the second candle, but closes within the gap created between the first and second candles, often engulfing the second candle’s body.

The visual effect is striking: the market appears to be gaining momentum, but suddenly stalls, with sellers seizing control. The ‘two crows’ refer to the two candles perched above the previous uptrend, ready to swoop down.

Why Australian Investors Are Watching for This Pattern in 2025

With the Reserve Bank of Australia (RBA) maintaining a cautious stance on interest rates and inflation forecast to hover near 3% in 2025, many local equities are experiencing short-lived rallies followed by abrupt corrections. In this climate, reversal patterns like the Upside Gap Two Crows are gaining new relevance:

• Sector Volatility: Tech and energy stocks, which saw explosive gains in late 2024, have been particularly susceptible to reversal signals as investors lock in profits amid policy uncertainty.
• Global Cues: With the US Federal Reserve telegraphing fewer rate cuts and China’s economic growth slowing, international sentiment is swinging quickly, impacting ASX-listed multinationals.
• Algorithmic Trading: A growing cohort of Australian traders are using algorithmic strategies that trigger on candlestick patterns, amplifying the effects of these signals.

For example, in March 2025, several ASX-listed lithium miners formed Upside Gap Two Crows patterns following a surge in battery metals demand. The subsequent sell-off underscored the pattern’s predictive power in a high-volatility environment.

How to Use the Upside Gap Two Crows in Your Strategy

Spotting the Upside Gap Two Crows is only part of the equation—acting on it requires discipline and context. Here’s how seasoned Australian investors are integrating this pattern into their playbook:

• Confirmation Matters: Wait for the next session to confirm the reversal, ideally with a lower close or increased selling volume.
• Pair With Fundamentals: Combine technical signals with earnings releases, policy announcements, or macroeconomic data for a more complete picture.
• Set Smart Stops: Use trailing stop-loss orders to lock in gains if the reversal materialises, especially in volatile sectors.
• Watch Market Breadth: If multiple blue-chip stocks or sectors are flashing Upside Gap Two Crows simultaneously, it may point to a broader market correction.

Remember, while the Upside Gap Two Crows is a bearish pattern, it’s not infallible. False signals can occur in thinly traded stocks or during news-driven spikes. In 2025’s fast-moving markets, blending technical analysis with broader market awareness is key.

Real-World Example: ASX 200 and the Upside Gap Two Crows in Action

In April 2025, the ASX 200 index posted a sharp rally on optimism around the federal budget. However, a cluster of large-cap financial stocks printed Upside Gap Two Crows patterns. Within days, the index retraced 2.5% as profit-taking swept through the sector, validating the pattern’s warning for those who were watching.

Technical traders who identified the pattern early were able to hedge portfolios or rotate into defensive assets, minimising losses as the reversal unfolded.