Friday, October 31, 2014

Reversal Candlestick pattern: Dark Cloud Cover Signifying Bearish Reversal

A dark cloud cover is a bearish reversal pattern that signifies weakening buying pressure. The pattern involves the body of a red candle closing within the body of the previous green candle. Graphically, this pattern shows that despite a strong session, the currency pair is meeting resistance at higher levels. If the green candles does not close at least halfway into the body of the red candle, traders need to be careful with formation, as it may be giving a false signal. In such cases, it is probably prudent for traders to wait for a trend reversal confirmation in the next candle. The deeper the second candle covers the first candle, the stronger the signal. In conclusion, The Dark Cloud Cover pattern is distinctly bearish as prices first make new highs but end up closing below the middle or prior

candles's range. The chart below shows a dark cloud formation.