How To Identify And Earn Good Profit With Dark Cloud Cover With Current Charts Analysis? Learn how to use the Dark Cloud Cover candlestick chart pattern to capture big moves in the market. MoneyWiseMind provides expert analysis and practical tips for traders to discover the power of this popular chart pattern.
We all know that price is God. If you understand the price movements correctly and anticipate it well in advance, there will be no looking back for you. We use candlestick charts to identify chart patterns of various instruments for making trade. To develop an effective trading setup we need to learn different types of chart patterns. We have already made a series of candlesticks chart patterns (A Logical Guide To Candlestick Chart Patterns). Here we will discuss how we have captured a big move with the Dark Cloud Cover candlestick chart pattern in Axis Bank and Asian Paints and earned a good profit. We hope you will learn something from this. Alright! Read on.
Before we go into details, first we will discuss what is Dark Cloud Cover candlestick chart pattern and its importance.
Dark Cloud Cover candlestick chart pattern is made of two candles. It is a bearish reversal pattern that appears at the end of an uptrend. Location is very important. If it forms at resistance it signals a potential weakness in uptrend and can turn to be a possible trend reversal to the downside.
Dark Cloud Cover candlestick pattern is formed with a bearish candle that opens higher but closes below the mid point (50%) of the prior bullish candle.
Logic Of Dark Cloud Cover:
First, in the existing uptrend a bullish candle is formed. In the 2nd session the market opens gap up reconfirming bulls' control over the market. But at the end,bears take control and are successful in bringing the price below the midpoint of the prior candle and form a bearish candle. That means, at the opening bulls push the price higher, but at the end bears become stronger than the bulls and are able to pull down the price sharply.
Here is the real time example which we have caught today. Yesterday on 27th April, 2023 we identified a Dark Cloud Cover candle that was formed in the Axis Bank daily chart, the same as in Asian Paints daily chart also. See the charts below.
On 28th April, when the market opened,we went short in Axis Bank below Rs. 877.From the below chart of Axis Bank (28th April) you can see how the stock fell to a low of Rs. 853.65. However, we exited at Rs. 856 keeping a stop loss at Rs. 890 a good risk reward trade.
Similarly, in Asian paints we went short at Rs.2894 and covered at Rs. 2860 keeping a stop loss at Rs. 2920.See the below chart of Asian Paints (28th April). It was an open=high trade also, we will discuss it in future. Open was 2919.95,high was Rs 2919.95.
Both the trades were intraday, as we all know that sell trade positional is not allowed, so we did intraday in cash. One can do positional sell trade through futures and options. In futures we can carry the trade weather it is a buy or sell.Or we can buy a put which we can carry. Or we can sell call options that we can carry also.We buy a call option when we expect the market to go up and we buy put when we expect the market to come down. But in futures and options we require to keep a margin money which is high. But futures and options are very risky. It is not anybody's game. Those who are seasoned traders or pro traders are doing futures and options with hedges to minimize risk. Retailers are advised not to indulge in futures and options as these carry high risk. They should practice in cash trade with small quantity to polish their skill for sometimes first. Read 50 charts daily to identify perfect setup and practice. Then you will be successful.
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Disclaimer: The information provided on MoneyWiseMind is for educational and informational purposes only. It is not intended to be financial advice, and you should not rely on it as such. Before making any financial decisions, you should consult a licensed financial advisor.
