This is yet another presentation of two very important candlestick formations. This presentation will be an introduction to the next issue that will be dealt with, i.e. stronger versions of similar candlestick formations.
- What are the characteristics of the piercing line formation?
+ Formation is made up of two candlesticks.
+ The first candle is a black candlestick which continues the decrease trend.
+ The second candle, which is a white candle has an opening price under the previous candlestick closing price, but breaks through around 50% of the first candle and does not exceed its body.
+ Appears on bottoms and signals trend reversal.
• Dark Cloud Cover
- What are the characteristics of the dark cloud cover formation?
+ Formation is made up of two candlesticks.
+ The first candle is a white candlestick which continues the increase trend.
+ The second candle, which is a black candle has an opening price above the previous candlestick closing price, but breaks through around 50% of the first candle and does not exceed its body.
+ Appears on tops and signals trend reversal.
Examples:
Which formations are found in the pink rectangles?
1. This is not a black cloud cover because the opening of the second candle is not above the closing price of the first candle.
2. This is not a piercing line formation because the opening price of the second candle is not below the closing price of the first candle.
Which formations are found in the pink rectangles?
1. This is not a black cloud cover because the second candle does not break through 50% of the first candle.
2. This is not a black cloud cover due to the fact that the whole first candle is covered. This formation also signals the power of the bears and will be discussed in the next presentation.
3. This is also not a piercing line formation due to the fact that the whole first candle is covered.
Omar Arnaout
X-Trade Brokers Dom Maklerski S.A.
Omar.arnaout@xtb.com