The Dark cloud cover candlestick pattern can be considered as a reversal pattern. The pattern has 2 candle sticks. The primary candle is optimistic or bullish candle (green). The second candle is pessimistic or bearish candle (red).
During the formation of this pattern, the second candle opens higher than the primary candle’s closing price. The second candle closes below the center of the primary candle. This pattern is formed because of indecision in long and short activity within the stock exchange.
Piercing Candlestick Pattern or Dark Cloud Covering Pattern?
The Piercing candle pattern may be a reversal pattern. The pattern has 2 candles. The primary candle is pessimistic or bearish. The second candle is optimistic or bullish. During this pattern, the second candle opens below the primary candle’s shut. The second candle closes higher than the center of the primary candle. This pattern forms because of indecision in going long and short activity within the stock exchange.
When the Dark cloudiness pattern forms, investors should wait and see immediate price action movement. If consecutive candle may be a pessimistic candle, it are often used as stop-loss or exit point. Once the Piercing patterns forms, if consecutive candle may be a optimistic candle, it are often used as trigger for entry purpose. However, several traders use a mixture of patterns and indicators for entry and exit.
In a dark cloud cover candlestick pattern, if the candlestick duration used in high i.e. 1 day, 3 day or even week then results are good. For a short duration, it can give false signals as well.
All in all, dark cloud cover and piercing pattern are both for reversal scans. However, candlestick patterns should never be traded alone. Because they are pattern not strategies. We need to consider strategies, risk management, proper entry and exit to trade well. Stay profitable!!