| In this article we are going to cover a Japanese | | | | the day. The result is the formation of the dark cloud |
| candlestick pattern that is well know in bullish circles | | | | cover that sends the bulls home with horns removed. |
| to exhibit the nasty trait of crashing their bull parties, | | | | The deeper the second candlestick pushes into the |
| bringing with it the most hated of colors, red! This | | | | previous candlestick, the more powerful the indication |
| candlestick formation is correctly and ominously called | | | | of a possible trend reversal. On the third day, |
| the dark cloud cover. The appearance of this | | | | confirmation is realized if a black candlestick is formed |
| formation often sends bulls hightailing it to greener | | | | with a lower close or a gap down. Once confirmation |
| pastures and growling bears piling on in preparation of | | | | has been given, the bull party has now been turned |
| the feeding frenzy they suspect is just around the | | | | into a marauding bear feeding frenzy. |
| corner. All they are waiting on is confirmation of their | | | | The formation of a dark cloud cover is a highly |
| reservation at the table, which is possibly only just a | | | | reliable indicator, revealing that a trend reversal to the |
| candlestick away. | | | | downside may be about to occur. Bulls should |
| This dark cloud cover requires two candlesticks to | | | | consider scaling out of positions while bears should |
| complete the pattern with the first being a long | | | | consider opening positions once the reversal is |
| white candle that shows the continuation of an | | | | confirmed. Japanese candlestick chart patterns like |
| uptrend. The second candlestick opens strong and | | | | the dark cloud cover have been used for centuries |
| above the previous candle often fooling bulls into | | | | starting with rice traders in feudal Japan, and more |
| believing the uptrend is continuing. However, as the | | | | recently in the financial markets, to predict price |
| session continues hungry bears wrestle control from | | | | movement. Integration of candlestick charting into a |
| the bulls, pushing the candlestick ever deeper into the | | | | trading system may help increase the percentage of |
| preceding candlestick closing at or near the low of | | | | winning trades. |