Dark Cloud Cover / Kabuse Candlestick
        The Dark Cloud Cover pattern composed of an up first day (Green body) candlestick followed by a second day red body candlestick that opens at a higher price, thus generating a gap, but that fills the gap and closes midway through the previous day's green long closing bozu body. This pattern is opposite with the Piercing line. Kabuse candlestick is a second day candlestick that negates the original buying activity, it is generate a bearish reversal or selling signal.

        The kabuse candlestick's price behaviour can due to three types of dark cloud cover patterns :

  • Long Black Closing Bozu - settles under the 50% level of the original green candlestick.
  • Black Marubozu - settles marginally 50% level of the original green candlestick.
  • Long Black Opening Bozu - settles under the 50% level of the original green candlestick.

Interpretation :
        This Dark Cloud Cover indicates that the first green body candlestick is the up day, and on second day, the share opens higher than the previous day's low, an overnight price gap was generated. Although this is a strong opening, but the share does not strengthen any further. The market fills this gap and continues to rally, recovering most of the lost ground from the previous session. Therefore, by closing below the 50% level of the first day's range, the Kabuse candlestick generates a strong selling signal. The further confirmation is when the price of the following session climbs below the lows of the original two days.

Important Criteria :

  1. A long green body candlestick followed by a red body candlestick.
  2. The second day's red body candlestick (kabuse) must close below 50% level but above the open price of the prior green candlestick.
  3. Occurs in an uptrend.

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