Whether a pattern is bearish or bullish reversal, it depends upon whether it appears at the end of a downtrend (Piercing Line) or an uptrend (Dark Cloud Cover).
PIERCING LINE (BULLISH)
Piercing Line is a bottom reversal pattern / bullish reversal pattern.
It could be formed at the end of a downtrend, or during a pullback within an uptrend, or at the support.
This is a 2-candle pattern which can signal a possible turning point:
The 1st day is long black/red candle.
The 2nd day is a long white body candle that opens sharply lower, below the trading range of the previous day, but the price then rises and closes above the midpoint (50%) level of the black/red body of the 1st day candle.
If the following day the price continues to rise and close higher (preferably on a strong volume), it provides confirmation to this bullish reversal pattern.
DARK CLOUD COVER (BEARISH)
Dark Cloud Cover is a top reversal pattern / bearish reversal pattern.
It can be formed at the end of an uptrend, or during a bounce within a downtrend, or at the resistance.
This is a 2-candle pattern which can signal a possible turning point:
The 1st day is long white candle.
The 2nd day is a long black/red body candle that opens sharply higher, above the trading range of the previous day, but the price then drops and closes below the midpoint (50%) level of the white body of the first day.
If the following day the price continues to drop and close lower (preferably on a strong volume), it provides confirmation to this bearish reversal pattern.
To read about other Candlestick Patterns, go to: Learning Candlestick Charts.
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2 comments:
Hi OTB :
Thanks for the articles on candlestick patterns that you've been putting up for us week after week.
I find it less intimidating to learn a particular candlestick pattern one at a time each week and take note of its implication than to pick up a candlestick chart book and get confused by reading chapters after chapters of candlestick patterns.
Yours Truly,
Tony Chai
My Options Trading Blog
Thanks for your support, Tony. :)
These articles are just the summary of the important concepts of candlestick patterns that I learnt from books & many websites.
But I do share your opinion too. After reading too many books/websites, sometimes we'll get confused. That's why I like to summarize them for easier reference.
However, if one likes to get deeper understanding, reading books is still recommended.
Cheers,
Options Trading Beginner
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