Dark Cloud Cover Pattern
The dark-cloud cover in Candlestick Patterns. it is a dual-candle pattern that is a top reversal after an uptrend or, at times, at the top of a congestion band.
In Dark Cloud Cover Pattern first day of this two candle pattern is a strong white real body. the second day’s price opens above the prior session’s high (that is above the top of the upper shadow). However, by the end of the second day’s session, the market closes deeply within the prior day’s white body. the greater the degree of penetration into the white real body, the more likely this is a top.
Dark Cloud Cover Pattern Chart Example
Dark-Cloud Covers Patterns Key Point:
- In Dark cloud covers greater the penetration of the black real body’s close into the prior white real body, the greater the chance for a top. (if the black real body covers the prior day’s entire white body, it would be a bearish engulfing pattern rather than a dark-cloud cover). 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 pattern, consequently, can be more meaningful top reversal. If a long white real body closes above the highs of the dark-cloud cover, or the bearish engulfing pattern it could presage another rally.
- During a prolonged ascent, if there is strong white day that 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 black real body day, opening on its high and closing on its low, then a shaven head and shaven bottom black day has occurred.
- if in Dark Cloud covers the second body (that is , the black/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.
- if in Dark Cloud covers on the opening of the second day, there is very heavy volume, then 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 sell off. if probably won’t be too log 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.