Stock Trading for Beginners - Learn about Candlestick Charts - Dark Cloud Cover
When using charts to trade stocks it is a good idea for beginners, or even experienced traders, to get to grips with Japanese Candlestick stock charting techniques as they are so widely used by professional traders - for a list of ebooks on candlestick trading at Amazon see Candlestick Courses - downloadable Ebooks. In candlestick charts "Dark Cloud Cover" is referred to as a "two candle bearish reversal pattern". In order for it to be valid it must occur at the top of an uptrend. |
| Japanese Candlestick Charts - Dark Cloud Cover |
The first candle has a white(or green) real body indicating a close higher than the open, the second candle has a black (or red) body that opens above the body of the 1st candle, only to turn around and close below the middle of the 1st candle. For this reversal to be confirmed the price in the next period must be beneath the low of the 2nd candle.
If you are conservative stock trader by nature then you will prefer to wait and see if the price closes below the low of the black candle or even of the white candle. Confirmation is, however, not an absolute guarantee that there is a down trend starting, it may turn out to be a sideways trend or it may fail completely. It is therefore important to have stop losses in place (as you always should when trading stocks).
The dark cloud cover Candlestick Pattern shows that the bullish trend would appear to be continuing but the price then reverses as bulls decide to sell and the bears join in. The key element to watch is to see if the price falls below the middle of the first candle, this affects the confidence of the bulls and strengthens the confidence of the bears.
To get a clearer picture it is sometimes a good idea to add the two candles together, in this case adding together the two candles used for the dark cloud cover pattern gives a shooting star, which is also a bearish reversal pattern.
For other candlestick charts patterns see - Doji Candlestick and Candlestick Charts
Home : Stock Trading for Beginners
0 comments:
Post a Comment