Showing posts with label dark-cloud-cover-piercing-pattern. Show all posts
Showing posts with label dark-cloud-cover-piercing-pattern. Show all posts


Dark Cloud Cover Candlestick

Dark Cloud Cover Candlestick Chart Pattern

The Dark-cloud Cover pattern is a bearish trend reversal or top reversal pattern that appears in an uptrend and signals a potential weakness in the uptrend. It is a two-candlestick pattern and is the antithesis of the piercing pattern. As it is a bearish trend reversal pattern, the dark-cloud cover pattern is only valid if it appears in an uptrend. The first candlestick in this pattern must be a light candlestick with a large real body.

 The following candlestick should be a dark candlestick that opens above the high of the first candlestick but closes well into the real body of the first candlestick, signaling a change in sentiment. The pattern is more reliable if the second candlestick closes below the middle of the first candlestick, with the deeper the penetration of the second candlestick the more significant it becomes. It also becomes more significant if the two candlesticks that form the pattern are Marubozu candlesticks with no upper or lower shadows.

1. The greater the degree of penetration of the red real body's close into the prior green real body, the greater the chance for a top. If the red real body covers the prior day's entire green body, a bearish engulfing pattern would occur. The dark-cloud cover's red real body only gets partially into the white body. Think of the dark-cloud cover as a partial solar eclipse blocking out part of the sun (that is,
covers only part of the prior white body). 

The bearish engulfing pattern can be viewed as a total solar eclipse blocking out the entire sun (that is, covers the entire green body). A bearish engulfing pattern,
consequently, is a more meaningful top reversal. If a long, green real body closes above the highs of the dark-cloud cover, or the bearish engulfing pattern, it could presage another rally.

2. During a prolonged uptrend, if there is a strong green day which opens on its low (that is, a shaven bottom) and closes on its high (that is, a shaven head) and the next day reveals a long red real body day, opening on its high and closing on its low, then a shaven head and shaven bottom black day have occurred. 

3. If the second body (that is, the red body) of the dark-cloud cover opens above a major resistance level and then fails, it would prove the bulls were unable to take control of the market. 

4. if, on the opening of the second day there is very heavy volume, a buying blow off could have occurred. For example, heavy volume at a new opening high could mean that many new buyers have decided to jump aboard ship. Then the market sells offs. It probably won't be too long before this multitude of new longs (and old longs who have ridden the uptrend) realize that the ship they jumped onto is the
Titanic. For futures traders, very high opening interest can be another warning.

Let's See Example In a Chart

Dark Cloud Cover Candlestick






Piercing candlestick
The bullish counterpart to the dark cloud cover is the “piercing pattern.” The first thing to look for is to spot the piercing pattern in an existing downtrend, which consists of a long red candlestick followed by a gap lower open during the next session, but which closes at least halfway into the prior black candlestick’s real body.

                                  The Piercing Pattern is composed of a two-candle formation in a down trending market. With daily candles, the piercing pattern will often end a minor downtrend (a downtrend that lasts between six and fifteen trading days). The day before the piercing candle appears, the daily candle should have a fairly large dark real body, signifying a strong down day.


1. The downtrend has been evident for a good period.

2. The body of the first candle is red; the body of the second candle is green.

3. A long red candle occurs at the end of the trend.

4. The green candle closes more than halfway up the red candle.

5. The second day opens lower than the trading of the prior day.

Signal enhancements

1. The reversal will be more pronounced, if the gap down the previous day close is more.

2. The longer the red candle and the green candle, the more forceful the reversal.

3. The higher the green candle closes into the red candle, the stronger the reversal.

4. Large volume during these two trading days is a significant confirmation.

See Example In a Chart

Piercing Candlestick Pattern

Pattern psychology

The atmosphere becomes bearish once a strong downtrend has been in effect. The price goes down. Bears may move the price even further but before the day ends the bulls enters and bring a dramatic change in price in the opposite direction. They finish near the high of the day. The move has almost negated the price decline of the previous day. This now has the bearsconcerned. More buying the next day will confirm the move.

                                                                              Being able to utilize information
that has been used successfully in the past is a much more viable investment strategy than taking shots in the dark. Keep in mind, when you are given privileged information about stock market tips, where you are in the food chain. Are you one of those privileged few that get top-notch pertinent information on a timely manner, or are you one of the masses that feed into a frenzy and allow the smart money to make the profits?