The dark cloud cover, three black crows, rising and falling threes and esoteric candlestick patterns generally…
|A Dark Cloud Cover Candlestick Pattern Occurs when price gaps up on one candlestick at the open but closes more than 50% below the midline of the preceding candle. Take a look at the illustration at the right:The Dark Cloud Cover when encountered in forex markets is generally a Bearish Harami pattern, due to the fact that there are fewer gaps in the forex market. See The Difference in Forex CandlesticksThere are some occasions when the forex market is likely to gap:|
…at these times you may encounter a genuine dark cloud cover candlestick pattern in forex, i.e. including the gap up.
The pattern is a bearish one, due to the fact that the bulls, after a strong move up at the outset of the signal candle, are in full flight retreat by its close. The pattern is especially significant after a long run-up in price.
|The Three Black Crows candlestick pattern, pictured at left, is bearish.|
It appears in an upward price move, with the second and third candle opening within the body of the preceding candle. It is more significant when all three candles close near their lows.It is an important omen in a strong uptrend, although often, much of the move down has already occurred by the close of the third candle.So even if you do enter on a break of the last candle, the chances are reasonably high that you are getting into the move too late.
The Rising and Falling Three candlestick patterns, depicted below, are important continuation patterns.
The requirements for a falling three candlestick pattern are:
- Price is in a down trend, and preferably a long black candle has just formed
- There follows a period of three or more smaller candles creating a move upwards. This collection of candles fails to close above the long bearish candle preceding it.
- The confirmation candle is another long bearish candle which closes with a fresh low in price, or close to that.
The requirements for a rising three candlestick pattern are the reverse of those required for a falling three pattern.
A perfect rising or falling three pattern can be an uncommon occurrence in trading. When they do occur, they can be powerful portents of a continuation in price, if the confirmation candle appears appropriately.