the hAnDbook of technIcAl AnAlysIsDescription:■ (^) The dark cloud cover is a double candlestick reversal pattern. See Figure 14.18.
■ (^) The second bearish candlestick gaps up above the high of the first candlestick
and subsequently reverses back down to at least midway or more of the first
candlestick.
■ (^) A longer second bearish candlestick is indicative of greater bearishness.
■ (^) It is best found in a protracted uptrend that is beginning to display weakness.
■ (^) Its corresponding bullish version is the piercing line.
Psychology:
■ (^) The dark cloud cover depicts buyers driving prices higher aggressively. Prices
eventually gap up, indicating that the buyers may have the upper hand. The
sellers subsequently resume control and drive prices back down to below the
midpoint of the first candlestick. This essentially puts the bears in control.
Trigger, Stoploss, and Confirmation:
■ (^) The trigger is at the low of the first candlestick.
■ (^) To confirm the reversal, price needs to close below the trigger level.
■ (^) The stoploss is placed at the high of the second candlestick.
■ (^) A buystop entry order may be placed at the high of the second candlestick
only if there is evidence that the trend is still in effect.
figure 14.18 A Dark Cloud Cover Formation.
dark Cloud Cover