As I have mentioned before, Candlestick Patterns are my favorite tool for Technical Analysis (TA) to do stocks analysis. It is because candlestick offers the complete information about what really happened between buyers and sellers during the trading time in stocks market. It is not only about what happened during the opening and closing time but also what happened in the whole trading time. Also that, we can use this candlestick to predict what will be happened in the next trading time.
Yeah, candlestick can be used as prediction tools since it tells us the stocks market psychology condition. Based on this stocks market psychology condition, we can tell what will be happened in the next trading range – Bullish (uptrend), nontrend (not up nor down trend), and Bearish (downtrend). For this prediction needs, we can utilizes the unique candlestick patterns that happened during the certain stocks trading time. These chart patterns act as bullish/buy or bearish/sell Signals.
Previously, I have discussed about 25 Candlestick Patterns that acts as Bullish/Buy Signals which include 7 Strong Bullish Candlestick Patterns , 14 Medium Strength Bullish Candlestick Patterns, and 4 Weak Bullish Candlestick Patterns. With these 25 Bullish Candlestick Patterns, We already have the good set of weapon to buy the stocks. However, beside the buying aspect, the selling aspect is also very important in stocks anaysis. It is because the selling is the way to realize the benefit (as well as to cut the loss).
Therefore it is a must to know the right way to sell the stocks. The right selling way can maximize our benefit (if the price up) as well as to minimize our loss (if the price down). So, let’s discuss about the Bearish Candlestick Patterns. As entitle, this time, we discuss about candlestick patterns that act as Bearish Reversal Signals with high reliability. The signal is strong so it can be utilized without additional Technical Analysis (TA) confirmations.
In this article, let’s discuss the Bearish Dark Cloud Cover Candlestick Patterns which is one of the strong bearish/sell signals available.
Technical Analysis of Bearish Dark Cloud Cover Candlestick Patterns
Bearish Dark Cloud Cover is the double candlestick patterns which needed two candlesticks to form the chart pattern. Bearish Dark Cloud Cover Candlestick Patterns consists of a solid white candlestick and a solid black candlestick which happened after a long/significant up trend (bullish). For more understanding, let’s take a look the picture below:
From picture above, we can see that this Bearish Dark Cloud Cover Pattern is formed by a solid white candlestick and a solid black candlestick after a long/significant up trend (bullish). This chart pattern can be happened in various trading range time but this time, let’s assume the chart pattern is happened in daily basis. In the first day, the buyers still continue to rule the stocks market with full power which shown by a solid white candlestick with long body.
If nothing happened in the next day, it is confirmed that the market is still in strong up trend (bullish). However, unfortunately, in the second day, there is a solid black candlestick with long body. The second day opening price is higher than the first day opening price which means that the buyers still try to rule the stocks market in the opening. However, somehow, the sellers finally gain their power and do a strong counter-attack which shown by the black long body and the closing price which near to the first day opening price.
So, it is high possibility that the sellers will continue to push the market price down in the next trading range time. The reliability is high so we can decide to sell our stocks (or do the short position) without the technical analysis confirmations. However, as always, for more certainty, I suggest to wait for the technical analysis confirmation. The confirmations can be from the candlestick itself or other Technical Analysis (TA) Indicators such as Trend Line, Volume, Stochastic, etc.
Since this article is about candlestick, let’s use the candlestick based confirmation as below:
We can see that the market is confirmed in down trend (bearish) if in the next trading range, there is a solid black candlestick with lower closing price than the first day opening price. In other word, the first day opening price is penetrated by a solid black candlestick. Please note that this penetration must not be happened in the next day (third day) but can happened in various range time. This technical analysis confirmation tells us that the sellers gain strong power – even stronger than the buyers power in the first day. In here, the technical analysis of Dark Cloud Cover candlestick patterns tell us it is the time to sell the stocks.
Having a beneficial trading everyone!
I too am a fan of the candlestick! I use it along with other indicators too, usually for buy signals with my ‘play money’.
It seems candlestick is a favorite for many traders.