Trade Mini Course - Yin Yang Candle Patterns
Top reversal pattern: dark cloud cover
In real life, when the sky is covered with dark clouds, it often means heavy rain is coming, when people quickly look for shelter from the rain.
Similarly, in the stock market, when a candlestick pattern resembles a “crow cap” appears, one might consider selling the stock, as this could be a sign of a price drop.
This article will introduce a bearish reversal candlestick pattern - dark cloud capped.
What is a dark cloud capped?
A dark cloud cover is a bearish reversal candlestick pattern consisting of two klines, usually seen in an uptrend.
The first K-line in its form is the long Yang line and the second one is the yin. The opening price of the yin line is above the first candlestick entity, and the closing price is below the physical center position of the first candlestick.
Graphically, the pattern is like a sunny sunny day ushered in a cloudy cloudy day, so called a dark cloud cover.
The emergence of dark cloud capped patterns, may be a signal of peaked prices.
How is a dark cloud cover formed?
The dark cloud cover usually appears in the upward trend, at this time, the stock price may be at a stage high.
The first K-line of this pattern is the long Yang line, indicating that the market continues the previous upward market, buying sentiment is strong.
The next day the stock price jumped high, indicating that the bullish sentiment in the market is still strong.
However, over time, the stock price did not continue to rally, but shocked the downside,
The final closing price fell below the center of the first candlestick entity, forming a yin line.
This means that the power of the long to push price increases is significantly weakened, with the empty side or in control of the big picture. This may be a signal that the rise is near the end, and the resulting is likely to be the short market.
But whether the trend reversal really occurs, it needs to be observed further with other technical indicators.
How to identify a dark cloud capped?
In combat, identify the clouds cover pattern as a reversal signal, you can follow the steps below:
Identify uptrend. The first thing is to identify the upfront trend. Before the emergence of dark clouds capped, there needs to be a clear uptrend. This means that the price continues to rise over a period of time.
Find a Changyang Line. The first candlestick of the form should be a yang wire and have a larger entity, indicating that the long is firmly in control of the market.
Second K-line stock jumped high. In other words, the opening price of the second K-line is higher than the closing price of the Sun's previous day, forming an upward gap. The larger the rise gap, the strength of future reversal may be stronger.
The second K-line closing for the yin. The closing price of the second candlestick must form a yin line below the middle of the first candlestick entity. The deeper the downward, the more reversal force may be
Confirm the reversal signal of the pattern. Investors generally confirm the reliability of the bearish signal by observing the price movements of the third bar bar. If the third candlestick is a falling yin, it may be the beginning of the bearish market.
case analysis
The figure below shows a dark cloud cover pattern that appears on the daily chart of Naifei (NFLX) stock price.
On the chart, you can see that the stock price has undergone a clear wave of rally, indicating a strong buying sentiment.
At the top of the uptrend, a dark cloud capped pattern appeared. The first K-line is the long Yang line, and the second one is the yin line. The second K-line stock jumped high, but the final closing price was below the middle of the first candlestick.
The emergence of a dark cloud cover pattern may be a signal of peaked stock price.
To confirm the reliability of this reversal signal, you can refer to the price movement of the third candlestick. As you can see from the chart, the third candlestick is a falling yin line, and the bearish signal is further confirmed.
After that, the price of Nai Fei ushered in a wave of decline.
summed
A dark cloud capped is a bearish reversal pattern consisting of two candlestick, usually seen in an uptrend.
The dark cloud cover pattern helps traders confirm potential exit times.
In actual combat, candlestick patterns should be combined with other technical analysis tools to better assist trading decisions.
