Forex for a trader
Dark cloud cover candlestick forex

Dark cloud cover candlestick forexDark Cloud Cover is a bearish candlestick reversal pattern, similar to the Bearish Engulfing Pattern (see: Bearish Engulfing Pattern). There are two components of a Dark Cloud Cover formation: A Dark Cloud Cover Pattern occurs when a bearish candle on Day 2 closes below the middle of Day 1's candle. In addition, price gaps up on Day 2 only to fill the gap (see: Gaps) and close significantly into the gains made by Day 1's bullish candlestick. The rejection of the gap up is a bearish sign in and of itself, but the retracement into the gains of the previous day's gains adds even more bearish sentiment. Bulls are unable to hold prices higher, demand is unable to keep up with the building supply. Dark Cloud Cover Candlestick Chart Example. The chart below of Boeing (BA) stock illustrates an example of the Dark Cloud Cover Pattern: Dark Cloud Cover Potential Sell Signal. Traders typically suggest not selling exactly when one sees the Dark Cloud Cover Pattern (Day 1 & Day 2) until other confirming signals are given such as a break of an upward trendline or other technical indicators. One reason for waiting for confirmation is that the Dark Cloud Cover Pattern is a bearish pattern, but not as bearish as it could be: part of the gains from Day 1 have still been preserved. The Bearish Engulfing Pattern (see: Bearish Engulfing Pattern) can be viewed as a more bearish formation, it completely rejects the gains of Day 1 and usually closes below the lows of Day 1. Also of interest, the bullish equivalent of the Dark Cloud Cover Pattern is the Piercing Pattern (see: Piercing Pattern). Bullish and Bearish Candlestick Reversal Patterns. There are also several types of reversal candlestick patterns within Forex trading, as defined below. Dark Cloud Cover Engulfing Evening Star Harami Morning Star Doji Piercing Line Three Black Crows Three White Soldiers. Dark Cloud Cover Pattern. During an upward trend in the market gaps will begin to open, but they are not stable and will lose ground falling below the midpoint of the market the previous day. This pattern indicates the opportunity for investors to capitalize at the opening of the market the next day. This is actually a warning sign for bullish investors. This candlestick pattern is the exact opposite of the Piercing Line pattern.

This pattern indicates a bullish trend and has a high reliability rate. A white body followed by a black body. The black body passes the midpoint of the prior white body. This candlestick pattern occurs in an uptrend. This pattern occurs when a candle body of the days market completely engulfs the body of the previous day. There are also several engulfing patterns, white engulfing candles are bullish, black engulfing candles are bearish. A bullish engulfing commonly occurs when there are short term bottoms and a bearish engulfing will occur when the market is at the top. Many of the other candlesticks, such as Dojis, Hammers and Hanging Man, require the confirmation that a trend change has occurred that follows an engulfing pattern. This pattern indicates a bullish trend and has a high reliability rate. When engulfing occurs in a downward trend, it indicates that the the trend has lost momentum and bullish investors may be getting stronger. The first day's color indicates the trend of the trading day. The second real body should have the opposite color of the first real body. The second day's body should completely engulf the previous day's body.

When engulfing occurs during an upward trend, it indicates the market will open with a new high. This high will be followed by a high volume of sell-offs, that result in the day closing at or below that of the previous days opening. This indicates that the upward trend has suffered and became weak and the bearish investors may be gaining some strength in the market. This pattern indicates a bullish trend, but has only a moderate rate of reliability.. The first day's color indicates the trend of the trading day. The second real body should have the opposite color of the first real body. The second day's body should completely engulf the previous day's body. Evening Star Pattern. When an upward trends occurs the market will get stronger, but as it gets stronger on a long white day, gaps will begin to open on the second day. Second day trading on Forex, stays withing a small range and will close at or near what it opened at. This pattern generally indicates that confidence in the current trend has eroded. When this trend reversal is confirmed, the third day will be a black day. This pattern indicates a bullish trend and has a high rate of reliability..

The first day is a long white day. The second day, gaps begin to open higher from the first day. The third day is a long black day and the close of market will be below the midpoint of the first white day. At the end of an upward trend which has a long white day, a black candlestick opens that is lower than what the previous day closed at. Market trading is generally light and the day will close lower than what it opened at. This signals that the current upward trend is losing strength and this indicator is confirmed with the next trading day seeing candlesticks following the reversal trend. This pattern indicates a bullish trend, but it has a low rate of reliability.. When a long black day occurs at the ending of a downward trend, a white candlestick will open that is higher than what the previous day closed at. Prices will rise and many shorts are covered, this will encourage even more investors to buy. This pattern is usually confirmed when the next trading day's candlestick follows the reversal trend. A long body followed by a short body with opposite color. A short body is completely within the previous day's long body. The color of the second candle is not important. Morning Star Doji Pattern. In a downward trend, the market will support the bearish investing trend with a long black day; gaps will begin to open on the second day of trading. The Forex market will see trades that stay within a small range and it will close at or near where it opened. This pattern generally indicates the potential for a rally since many of the positions have changed. Confirmation of this trend reversal is marked by the third day being a white day. This pattern also indicates a bullish trend and has a high rate of reliability. The first day is a black day which indicates the trend of the market. The second day must be a Doji day. The third day is a white day and supports the reversal of the trend. Piercing Line Pattern.

This pattern occurs when gaps open in the market during a downward trend, but the market gains enough strength to close above the midpoint of the previous day. This pattern is a good indication that the opportunity for the bullish investors to enter the market and help support the trend reversal. It's also the opposite of the Dark Cloud Cover pattern . It's a bullish trend that only has moderate reliability. A long black body followed by a white body. The white body peaks above the midpoint of the prior white body. This pattern occurs in a downward trend. Three Black Crows Pattern. This pattern is indicated by three long black days that each end with consecutively lower closing rates. It generally indicates that the market rates have been too high for too long of a period and the investors are slacking off to compensate. This pattern is a bearish trend and has a high reliability rate. Three black days occur, each with a close below the previous day. Each day opens within the body of the previous day. Each day closes near or at the low of the day. Three White Soldiers Pattern. With this pattern, there will be three long white days in a downward trend; each day will close at consecutively higher rates. This usually reflects fortitude in the future market, since a trend reversal is in progress that is building on moderate increases in the market.

This bullish trend offers a high reliability rate. Three long white days occur, each with a higher close than the previous day. Each day opens within the body of the previous day. Each day closes near or at the high of the day. The Bearish Dark Cloud Cover Candlestick Chart Pattern. A number of Candlestick chart patterns consist of two individual Candlesticks that result in specific interpretations that depend on how they arise. The Bearish Dark Cloud Cover candlestick pattern is one such two candlestick pattern that forms a bearish reversal signal. This pattern is the mirror opposite of the Bullish Piercing Line Candlestick reversal chart pattern. Like its counterpart, this candlestick chart pattern is only a moderately reliable market indicator of a possible future reversal in price action to the downside. The Bearish Dark Cloud Cover pattern can be used by forex traders skilled in this method of technical analysis to help signal a trend reversal to the downside. The Dark Cloud Pattern Characteristics. The Bearish Dark Cloud Cover Candlestick chart pattern is a bearish reversal pattern consisting of a two day candlestick formation.

The two candlesticks that make up this pattern consist of a bullish white candle observed on the first day and a bearish black candle seen on the second day. The first candle of the Bearish Dark Cloud Cover Candlestick chart pattern is generally a long white candle that tends to come as the forex market is trading towards the end of a prolonged move to the upside. The second candle consists of a black candle which gaps above the previous day’s high of the white candle and then falls and closes below the midpoint of the white day’s body. The Psychology of the Bearish Dark Cloud Cover Pattern. The Bearish Dark Cloud Cover Candlestick chart pattern is named this way because the second day’s candle closing price falls below the midpoint of the first day’s candle, causing a “Dark Cloud” to cover the center point of the white candle. Furthermore, the lower the currency trades after falling below the mid point, the stronger the implied bearish move signaled by the appearance of this chart pattern will be. Basically, the Bearish Dark Cloud Cover Candlestick chart pattern acts as a downside reversal pattern that will generally form at the end of a prolonged up trend or during a corrective rally in a downtrend. The exchange rate for the currency pair gaps higher on the opening of the second day only to attract more selling interest. This thereby causes the currency pair’s rate to decline sharply to fill the gap. The bulls have been in control until the second day of the Bearish Dark Cloud Cover pattern, when selling interest is sparked by the gap up as the bears quickly move in to take advantage of the higher rates which contributed to some of the previous day’s losses. Moreover, the success the bears have had in selling down the currency pair, and the fact that its exchange rate has closed below the mid point of the previous day’s white candle fuels even more bearish sentiment for the pair. The Bearish Dark Cloud Candlestick chart pattern has similarities to the Bearish Engulfing pattern, the Bearish Thrusting pattern and the Bearish Meeting Lines pattern.

How a Trader Takes Advantage of the Bearish Dark Cloud Cover Pattern. The Bearish Dark Cloud Cover Candlestick chart pattern would typically be traded by shorting the market on the second day after the currency pair’s rate has declined past the middle point seen on the white candle day. Naturally, forex traders need to remember that the position will have inherent risk, since the Bearish Dark Cloud Cover Candlestick chart pattern is only a moderately reliable downside reversal pattern. As a result, those traders who are more adverse to risk might want to wait for further confirmation of the new downward trend indicated by the appearance of a Bearish Dark Cloud Cover Candlestick chart pattern by waiting for a long black candle day to initiate a short position. Risk Statement: Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose more than your initial deposit. The high degree of leverage can work against you as well as for you. See our Patterns Dictionary for other patterns. Check our CandleScanner software and start trading candlestick patterns! Figure 1. Dark Cloud Cover pattern. Forecast : bearish reversal Trend prior to the pattern : uptrend Opposite pattern : Piercing. Construction : First candle a candle in an uptrend white body Second candle black body the opening above or equal of the prior high the closing below the midpoint of the prior candle the closing above the previous opening.

This article is devoted to the Dark Cloud Cover two-line pattern. The second candle's opening price should be above the prior candle's high. It is, however, acceptable that these two prices are equal (CandleScanner implements this that way). Closing of the second candle needs to be below the midpoint of the first candle, but not lower than its opening. The Dark Cloud Cover is a classic bearish reversal pattern, which appears at the end of an uptrend. After definite increases, the second candle of the pattern opens creating a price gap, however, closes below the midpoint of the previous candle, proving the market weakness. Pattern's reliability is higher if the trading volume increases on the second line. As every other pattern, it should be confirmed by the following candles. Confirmation may be for example in the form of breaking a support level or a trend line. If the pattern managed to reverse an uptrend, its second candle creates a strong resistance zone. Figure 2. An occurrence of Bearish Harami is confirmed by a Black Spinning Top , which breaks a trendline and creates a resistance zone. The classic definition describing Dark Cloud Cover requires a price gap between the first and the second line (second's candle opening price above the previous candle's high). CandleScanner relaxes this condition allowing second's candle opening price to be equal to the previous candle's high because it increases the number of found patterns.

Two lines of the Dark Cloud Cover need to appear as long lines which emphasize their power. The first line is bullish whereas the second although its opening is also very bullish, the overall black candle is very bearish. The first occurrence of Dark Cloud Cover stopped an uptrend exactly on the level of Bearish Harami . The Dark Cloud Cover is confirmed by the appearance of Turn Down pattern (breaking the trendline). The second line of Dark Cloud Cover forms a strong resistance zone. The second occurrence of Dark Cloud Cover is very similar being again confirmed by the presence of Turn Down pattern. The resistance zone created by the first Dark Cloud Cover pattern is working, stopping the market increase. Figure 3. In the analysis of the Figure 2. , we have emphasized the importance of patterns confirmation. On the Figure 3. , we can see a pattern occurrence, which the second line is formed at a significantly higher trading volume. However, the pattern appeared far above the trendline, and its confirmation is even more required.

The market has to break the trendline after the pattern occurrence. We can notice the Doji candle, which indicates the market indecision. The following candle, White Spinning Top , cancels the Dark Cloud Cover pattern (closing price above the pattern's second line). Dark Cloud Cover statistics. Below you can find some Dark Cloud Cover pattern statistics calculated by CandleScanner software. To see more detailed statistics, for other markets and periodicity try our CandleScanner software. Prices start at only $10, and you can see more detailed statistics, for other markets and periodicity. Click here to find out more! What is the 'Dark Cloud Cover' The Dark Cloud Cover is a bearish reversal candlestick pattern whereby a black candlestick opens above a white candlestick's close and below its midpoint. UpDown Gap Side-by-Side White . BREAKING DOWN 'Dark Cloud Cover' The Dark Cloud Cover pattern involves a large black candle forming a "dark cloud" over the preceding bullish trend. As with a bearish engulfing pattern, bulls push the price higher at the open, but bears take over later in the session and push the price sharply lower. The "takeover" of the trend is a sign that there could be a near-term bearish reversal.

The five criteria for the Dark Cloud Cover pattern are: An existing bullish uptrend. A bullish candle within that uptrend. A gap up on the following day. The gap up turns into a bearish candle. The bearish candle closes below the midpoint of the previous bullish candle. The Dark Cloud Cover pattern is further characterized by white and black candlesticks that have long real bodies and relatively short or non-existent shadows. These attributes suggest that the move lower was both highly decisive and significant in terms of price movement. Traders might also look for a confirmation in the form of a bearish candle following the pattern. Most traders use the Dark Cloud Cover pattern in conjunction with other forms of technical analysis as confirmation. For example, traders might look for a relative strength index (RSI) greater than 70.0, which provides a confirmation that the security is overbought. A trader may also look for a breakdown from a key support level following a Dark Cloud Cover pattern as a sign of a longer-term downtrend. Example of Dark Cloud Cover. The following chart shows an example of the Dark Cloud Cover pattern in the VelocityShares Daily 2X VIX Short Term ETN (TVIX): Chart courtesy of StockCharts. com. In this example, the Dark Cloud Cover occurs when the third bullish candle is proceeded by a bearish candle that opens higher and closes below the midpoint of the bullish candle. The pattern successfully predicted a downturn in the following session where the price moved nearly seven percent lower.

Traders might watch for a further fall in the price following the confirmation. The trader might set a stop-loss point at the midpoint of the second candle in the Dark Cloud Cover pattern - or about $9.75 in this case. A take-profit point might be set at the reaction low at around $7.00, where there could be support for the bulls to make another attempt at pushing the price higher. Dark cloud cover candlestick forex. A bearish reversal signal. In an uptrend a long white candlestick is followed by a black candlestick that opens above the prior white candlestick’s high (or close) and then closes well into the white candlestick’s real body—preferably more than halfway. The bullish counterpart of the dark-cloud cover candlestick pattern is the Piercing Pattern. A Japanese candlestick bottom reversal signal. In a downtrend, a long black candlestick is followed by a gap lower open during the next session. This session finishes as a strong white candlestick that closes more than halfway into the prior black candlestick's real body. Compare to the on-neck line, the in-neck line, and the thrusting line.

Get More FREE Training at Candlecharts Academy. How to Trade the Dark Cloud Cover Candlestick Pattern. Trading the dark cloud cover candlestick pattern can be very profitable, if done the right way. In this addition to my price action course, I’m going to show you how to correctly identify and trade this lucrative candlestick signal. This pattern is another moderately strong, two-candle reversal signal. You may have already read my previous article, Trading the Bullish Piercing Candlestick Pattern ; the dark cloud cover signal is basically the bearish version of that pattern. I like to trade this pattern, because, like the harami patterns and the bullish piercing pattern, this pattern often leads to good risk to reward scenarios when it works out. Also, the bullish piercing and dark cloud cover patterns are fairly common, providing candlestick traders with plenty of opportunities to test their skills and earn a profit. What is a Dark Cloud Cover Candlestick Pattern? The dark cloud cover pattern is a moderately strong, bearish reversal signal. Like all bearish reversal signals, a true dark cloud cover pattern only occurs after an uptrend in price.

Steve Nison ( the authority on candlesticks) says that a trend in price, as it relates to candlestick trading, may consist of just a few significant candles in one direction. This pattern consists of a relatively large bullish candlestick, followed by a bearish candlestick that closes deep into the real body of the first, bearish candlestick. The second candle in this pattern should close somewhere lower than the 50% mark of the first, bearish candle’s real body (see the image below). A non-Forex dark cloud cover signal is similar. The only difference being that the second, bearish candlestick needs to open above the close of the first, bullish candlestick; so there should be, at least, a small gap up before the second candlestick closes deep into the real body of the first one (see the image above). In Forex, a gap up to the second candle’s open is not necessary. The extreme liquidity of the Forex market (especially in the major pairs) ensures that there are rarely gaps in price from one candle to another. Note: You may come across a dark cloud cover candlestick pattern that resembles its non-Forex counterpart (second candle opens above the close of the first candle). Although this is a rare occurrence, it is usually a very strong bearish signal. Trading the Dark Cloud Cover Candlestick Pattern. In the image below, you can see a nice dark cloud cover pattern that signaled a major reversal. This one would have worked out nicely, and you could have made more than five times your risk. You might also notice that this reversal was so strong that it blew right past the bullish engulfing pattern that formed eight candlesticks later. Of course, upon seeing the engulfing pattern, that would have been a great place to lighten up on your position, even though it was mostly ignored. In the next example (below), you can see multiple dark cloud cover patterns.

The first signal could have earned you about twice your risk. You can see from this example, however, that candlestick signals are often very short term indications of where price is headed. The second signal, although it worked out, wasn’t looking quite as promising upon setup. The upward price movement that preceded that signal is not significant enough for my comfort; there were really only two bullish candlesticks making up that trend, including the first candlestick in the dark cloud cover formation. Also, the risk to reward ratio on that second signal wasn’t looking too great because of the large candlesticks that made up the second pattern, along with the tall upper shadow of the first, bullish candlestick in the pattern. Even though the reversal that followed was much more significant than the first one, you still would have only made about twice your risk. Note: Steve Nison recommends not taking trades where the distance to your first support area is not, at least, twice that of your risk. In the example above, the second signal would not have qualified, as the first support level is the preceding cycle low in price. In the next example (below), you will see another dark cloud cover candlestick pattern. The uptrend that preceded it wasn’t much of a move, but considering that all the candlesticks in that trend were bullish, and they each made slow but steady progress upward, I would have considered this move significant enough to count as our qualifying uptrend. One thing that a discerning price action trader may have considered is that the candles making up this dark cloud cover aren’t particularly large.

They are, however, relatively large when compared to the candles that make up the preceding uptrend. The example above is a perfect demonstration of why you should always seek, at least, twice your risk to the first support level (on bearish trades). As soon as price reached the previous cycle low (our first support level), it reversed again without much notice from the candlesticks – other than a couple of long lower shadows. The traditional confirmation entry happens when price breaks the low of the second candlestick in our dark cloud cover signal. The only other option is to enter at the open of the new candle. Your stop loss should be placed above the highest high in the pattern (remember to add the spread in Forex). As with any bearish reversal signal, a true dark cloud cover candlestick pattern only occurs after an uptrend in price. Trying to trade these candlestick signals from periods of price consolidation in the market is never a good idea. In non-Forex markets, remember that the second candlestick in this pattern needs to gap up slightly before closing deep into the first candlestick (lower than the 50% mark of the first candlestick’s real body). Due to the extreme liquidity in the Forex market, a gap up is not likely, although if it occurs, it is a very strong bearish signal. One of the beauties of candlestick trading is that it can be added to just about any trading system that you are currently using for more trading opportunities. Using a reliable, profitable trading system can help you qualify the best candlestick signals to take. Trading the dark cloud cover candlestick pattern can be very lucrative, if you know what you’re doing. Never risk your hard earned money trading these signals live until you’ve become an expert at trading them with your demo account (or paper trading). With a little practice, you’ll get a feel for this pattern, and you’ll be trading it like a pro in no time.

See our Patterns Dictionary for other patterns. Check our CandleScanner software and start trading candlestick patterns! Figure 1. Dark Cloud Cover pattern. Forecast : bearish reversal Trend prior to the pattern : uptrend Opposite pattern : Piercing. Construction : First candle a candle in an uptrend white body Second candle black body the opening above or equal of the prior high the closing below the midpoint of the prior candle the closing above the previous opening. This article is devoted to the Dark Cloud Cover two-line pattern. The second candle's opening price should be above the prior candle's high. It is, however, acceptable that these two prices are equal (CandleScanner implements this that way). Closing of the second candle needs to be below the midpoint of the first candle, but not lower than its opening. The Dark Cloud Cover is a classic bearish reversal pattern, which appears at the end of an uptrend. After definite increases, the second candle of the pattern opens creating a price gap, however, closes below the midpoint of the previous candle, proving the market weakness. Pattern's reliability is higher if the trading volume increases on the second line. As every other pattern, it should be confirmed by the following candles.

Confirmation may be for example in the form of breaking a support level or a trend line. If the pattern managed to reverse an uptrend, its second candle creates a strong resistance zone. Figure 2. An occurrence of Bearish Harami is confirmed by a Black Spinning Top , which breaks a trendline and creates a resistance zone. The classic definition describing Dark Cloud Cover requires a price gap between the first and the second line (second's candle opening price above the previous candle's high). CandleScanner relaxes this condition allowing second's candle opening price to be equal to the previous candle's high because it increases the number of found patterns. Two lines of the Dark Cloud Cover need to appear as long lines which emphasize their power. The first line is bullish whereas the second although its opening is also very bullish, the overall black candle is very bearish. The first occurrence of Dark Cloud Cover stopped an uptrend exactly on the level of Bearish Harami . The Dark Cloud Cover is confirmed by the appearance of Turn Down pattern (breaking the trendline). The second line of Dark Cloud Cover forms a strong resistance zone. The second occurrence of Dark Cloud Cover is very similar being again confirmed by the presence of Turn Down pattern. The resistance zone created by the first Dark Cloud Cover pattern is working, stopping the market increase. Figure 3. In the analysis of the Figure 2. , we have emphasized the importance of patterns confirmation. On the Figure 3. , we can see a pattern occurrence, which the second line is formed at a significantly higher trading volume.

However, the pattern appeared far above the trendline, and its confirmation is even more required. The market has to break the trendline after the pattern occurrence. We can notice the Doji candle, which indicates the market indecision. The following candle, White Spinning Top , cancels the Dark Cloud Cover pattern (closing price above the pattern's second line). Dark Cloud Cover statistics. Below you can find some Dark Cloud Cover pattern statistics calculated by CandleScanner software. To see more detailed statistics, for other markets and periodicity try our CandleScanner software. Prices start at only $10, and you can see more detailed statistics, for other markets and periodicity. Click here to find out more! Learn Forex Trading. Piercing Line and Dark Cloud Cover. A piercing line and a dark cloud look alike but the difference is that one occurs at the top of a Forex uptrend ( Cloud Cover ) and the other occurs at the bottom of a downwards Forex trend (Piercing). Upward Trend Reversal - Dark Cloud Cover Candlesticks.

Downward Trend Reversal - Piercing Line Candlesticks. Piercing Line Candlestick. Piercing line is a long black body followed by a long white body candlestick. The white body pierces the midpoint of the prior black body. This is a bullish reversal pattern that occurs at the bottom of a market downtrend. It shows that the market opens lower and closes above the midpoint of the black body. This shows that the momentum of the downtrend is reducing and the market trend is likely to reverse and move in an upward direction. This pattern is shown known as a piercing line signifying the market is piercing the bottom showing a market floor for the currency price downward trend. Piercing Line Candlestick.

Technical Analysis Piercing Line Candlestick. A buy signal is confirmed once price closes above the neckline which is the opening of the candlestick on the left of the Piercing Line candlestick. This is a bullish setup and price should continue moving upwards and for a trader who puts a buy trade just below the lowest price level. Dark Cloud Cover Candlestick. Opposite of piercing candlestick. This candlestick is a long white body followed by a long black body. The black body pierces the midpoint of the prior white body. This is a bearish reversal pattern that occurs at the top of an uptrend. It shows that the market opens higher and closes below the midpoint of the white body. This shows that the momentum of the uptrend is reducing and the market trend is likely to reverse and move in a downward direction. This pattern is shown known as a cloud cover signifying the cloud as a ceiling for the currency price upward trend. Dark Cloud Cover Candlestick. Technical Analysis Dark Cloud Cover Candlestick. A sell signal is confirmed once price closes below the neckline which is the opening of the candlestick on the left of this candlestick.

This is a bearish setup and price should continue moving downwards and for a trader who puts a sell trade just above the highest price level. Dark Cloud Cover Candlestick Pattern. Dark Cloud Cover Candlestick Definition. The dark cloud cover pattern occurs in an uptrend and is comprised of two candlesticks. The first candlestick in the pattern is a long green candle, that is accompanied with high volume. The next candlestick makes a higher high, but then sells off to close below the midpoint of the first candlestick, but not below the open of that candle. In Japan this snap back sell off is called a kabuse, which means to get covered or to hang over. Dark Cloud Cover Candlestick Chart Example. The dark cloud cover is one of the first signs that a potential bearish reversal is in play. Traders should wait for the low of the first candlestick in the pattern to be exceeded prior to taking a short position.

Stops can conversely be placed above the high of the first candlestick of the formation. The more the second candle closes below the mid-point of the first candlestick, the greater the odds of a successful dark cloud cover line reversal pattern.



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