[vc_row][vc_column][vc_column_text css_animation=”fadeInDown”]

Piercing Line & Dark Cloud Patterns

[/vc_column_text][vc_column_text css_animation=”fadeInLeft”]

THE PIERCING LINE PATTERN

The Piercing Pattern is viewed as a bullish candlestick reversal pattern, similar to the Bullish Engulfing Pattern and is a two-candle formation that occurs when the market is in a down trend. The first candle is black or red which is a continuation of the existing trend and the second candle opens below the low of the previous day. The piercing pattern closes more than midway up the black or red candle which is near or at the high for the day.

Criteria for piercing pattern
* The body of the first candle is black or red and the body of the second candle is white or green.
* The downtrend has been evident for a good period of time and a long black candle occurs at the end of the trend.
* The second day opens lower than the trading of the prior day.
* The white or green candle closes more than halfway up the black or red candle.
Signal Enhancements
* The longer the candle the more forceful the reversal.
* The greater the gap down from the previous day’s close the more pronounced the reversal.
* The higher the white or green candle closes into the black or red candle the stronger the reversal.
* Large volume during these two trading days is a significant confirmation.
Pattern Psychology
After a strong downtrend has been in effect the atmosphere is bearish. Fear becomes more predominant and the prices gap down. The bears may even push the prices down further however before the end of the day the bulls step in and dramatically turn prices around. The prices finish near the high of the day and the move has almost negated the price decline of the previous day. This now has the bears concerned. This move is confirmed by more buying the following day.
The psychology built into a major candlestick patterns are simple common sense investment philosophy. When you learn how to utilize the candlestick patterns correctly you now have the knowledge to improve your trading techniques for those trading entities you want to trade. You do not have to depend on canned programs that sometimes work and sometimes don’t work and you do not have to buy or sell stock recommendations blindly based on a research analyst’s recommendations. The candlestick patterns provide guidance as to what investors are actually doing at a certain point in time. Learning the major candlestick patterns as well as the secondary patterns will greatly improve your investments perceptions[/vc_column_text][vc_raw_html]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[/vc_raw_html][/vc_column][/vc_row][vc_row][vc_column][vc_column_text css_animation=”fadeInLeft”]

THE DARK CLOUD COVER PATTERN

The Dark Cloud Cover, in candlestick charting, is a pattern where a black candlestick follows a long white candlestick. It can be an indication of a future bearish trend. It is named the dark cloud cover because it looks like a dark cloud over a nice bright sunny uptrend.

The first day of this pattern is a long white or green candle at the top end of a trend with the second day’s open higher than the high of the previous day. It closes at least half way down the previous day’s candle and the further down the white or green candle it closes the more convincing the reversal is. Keep in mind that a close at or below the previous day’s open turns this pattern into a bearish engulfing pattern.
Criteria for the dark cloud cover
* The body of the first candle is white or green and the body of the second candle is black or red.
* A long white candle occurs at the top of the trend. The up-trend has been evident for a good period.
* The second day opens higher than the trading of the prior day.
* The black or red candle closes more than half-way down the white or green candle.
Signal Enhancements for the dark cloud cover
* The longer the candle the more forceful the reversal.
* The higher the gap up is from the previous days close the more pronounced the reversal.
* The lower the black or red candle closes into the white or green candle the stronger the reversal.
* Large volume during these two trading days is a significant confirmation.
Pattern Psychology
After a strong up-trend has been in effect the atmosphere is bullish. The bears then begin to appear and push the price back down and it finally closes at or near the lows for the day. The close has negated most of the previous day’s gains and the bulls are now concerned because they see that the uptrend may have stopped. This signal makes for a good short with a stop being the high of the black or red candle day. Notice that if the dark cloud candlestick closes lower and below the open of the previous day it will become a bearish engulfing pattern which has slightly stronger bearish implications.
Using candlesticks patterns with other technical analysis tools greatly enhances the ability to recognize what the candlestick charts are revealing. Understanding and using of these patterns will benefit you for the rest of your investment career.[/vc_column_text][vc_raw_html]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[/vc_raw_html][/vc_column][/vc_row]