The dark cloud cover are two candlestick normally found at the top of an uptrend and a piercing pattern forms in a down trend. One is the opposite of the other.
The Dark Cloud Cover.
In a dark cloud cover, the first candlestick is bullish and the second is bearish. The bearish candlestick covers more than 50% price level of the previous large bullish candlestick. This shows that the bulls/buyers have been strong in the market but sellers came in strongly and pushed prices as low as 50% of the buyers.
How to identify a dark cloud cover/ Characteristics
- The deeper it goes the stronger the pattern and the more valid it gets.
- Currency pair must be trending upwards.
- It is composed of two candlesticks, where the first candlestick is a large bullish candlestick and the second is bearish with a high above the high of the first candlestick and close below halfway of the first candlestick.
- The second candle opens above the close of the first candle.
- It normally appears at the top of a long uptrend or at times at the top of a congestion.
Let’s try to identify a dark-cloud cover on the chart below.
The piercing pattern
It is a bullish reversal pattern and is the opposite of the dark cloud cover.
A blue candlestick pierces the strong bearish candlesticks. The piercing pattern forms at the end of a down trend.
The large bearish candlestick shows that the bears are strongly over the market driving prices as low as possible. Formation of the bullish candlestick after the close of the bears shocks the bears and prices are driven back with strong momentum of the buyers closing above half way of the previous price. This may lead to indecision or the reversal of the trend.
How to identify a piercing pattern/ characteristics
- The currency pair must be in a down trend.
- It is composed of two candlesticks, where, the first candlestick is a large bearish candlestick and the second is bullish and the bullish candle closes above the half way of the first candlestick.
- The deeper it pierces the previous price the stronger it gets.
Taking a good look at the above chart,it clearly shows that a piercing pattern is a bullish or bottom reversal pattern and a dark-cloud cover is a bearish or top reversal pattern.
When you spot a piercing pattern forming on your chart, prepare for trend reversal to the upside, so get ready to catch a buy opportunity.
If you spot a dark-cloud cover form on your chart, prepare for a probable reversal to the down side, get ready for a sell opportunity. Like any other candlestick pattern, these patterns give strong signal confirmations when spotted on support and resistance levels.
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