Piercing & Dark Cloud
Lesson 5 of 106 min5 exercises
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Partial Engulfing Patterns
These patterns are like "weak engulfing" - the second candle doesn't fully engulf the first, but penetrates at least 50% into its body.
PIERCING LINE (Bullish)
Piercing line: a red candle, then a green candle that opens below it and closes above the midpoint of the red body.
Requirements:
1. Downtrend in progress
2. First candle is bearish
3. Second candle opens BELOW first candle's low
4. Second candle closes above the 50% mark of first candle
What it means: Sellers gap down, but buyers fight back hard.
Signal: Bullish reversal.
Nickname: "The Comeback"
1. Downtrend in progress
2. First candle is bearish
3. Second candle opens BELOW first candle's low
4. Second candle closes above the 50% mark of first candle
What it means: Sellers gap down, but buyers fight back hard.
Signal: Bullish reversal.
Nickname: "The Comeback"
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DARK CLOUD COVER (Bearish)
Dark cloud cover: a green candle, then a red candle that opens above its high and closes below the midpoint of the green body.
Requirements:
1. Uptrend in progress
2. First candle is bullish
3. Second candle opens ABOVE first candle's high
4. Second candle closes below the 50% mark of first candle
What it means: Buyers gap up, but sellers overwhelm them.
Signal: Bearish reversal.
Nickname: "The Storm" or "The Eclipse"
1. Uptrend in progress
2. First candle is bullish
3. Second candle opens ABOVE first candle's high
4. Second candle closes below the 50% mark of first candle
What it means: Buyers gap up, but sellers overwhelm them.
Signal: Bearish reversal.
Nickname: "The Storm" or "The Eclipse"
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Strength Levels
Penetration depth matters:
- Closes at 50%: Minimum valid signal
- Closes at 60-70%: Strong signal
- Closes beyond 80%: Very strong (almost engulfing)
- Closes at 100%+: Full engulfing pattern
- Closes at 50%: Minimum valid signal
- Closes at 60-70%: Strong signal
- Closes beyond 80%: Very strong (almost engulfing)
- Closes at 100%+: Full engulfing pattern
Tip
The deeper the penetration, the stronger the signal. A Piercing Line that closes at 75% of the first candle is much more bullish than one that barely hits 50%.
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Key takeaways
- Piercing Line = bullish, opens low, closes above 50% of prior red
- Dark Cloud = bearish, opens high, closes below 50% of prior green
- Deeper penetration = stronger signal
- Gap on open is required for classic pattern
Next: 5 quick exercises. Miss one and it comes back at the end.