The Bearish Dark Cloud Cover Candlestick Chart Pattern

A number of Candlestick chart patterns consist of two individual Candlesticks that result in specific interpretations that depend on how they arise.
The Bearish Dark Cloud Cover candlestick pattern is one such two candlestick pattern that forms a bearish reversal signal. This pattern is the mirror opposite of the Bullish Piercing Line Candlestick reversal chart pattern.
Like its counterpart, this candlestick chart pattern is only a moderately reliable market indicator of a possible future reversal in price action to the downside.
The Bearish Dark Cloud Cover pattern can be used by forex traders skilled in this method of technical analysis to help signal a trend reversal to the downside.


The Dark Cloud Pattern Characteristics


The Bearish Dark Cloud Cover Candlestick chart pattern is a bearish reversal pattern consisting of a two day candlestick formation.
The two candlesticks that make up this pattern consist of a bullish white candle observed on the first day and a bearish black candle seen on the second day.
The first candle of the Bearish Dark Cloud Cover Candlestick chart pattern is generally a long white candle that tends to come as the forex market is trading towards the end of a prolonged move to the upside.
The second candle consists of a black candle which gaps above the previous day's high of the white candle and then falls and closes below the midpoint of the white day's body.


The Psychology of the Bearish Dark Cloud Cover Pattern

The Bearish Dark Cloud Cover Candlestick chart pattern is named this way because the second day's candle closing price falls below the midpoint of the first day's candle, causing a "Dark Cloud" to cover the center point of the white candle.
Furthermore, the lower the currency trades after falling below the mid point, the stronger the implied bearish move signaled by the appearance of this chart pattern will be.
Basically, the Bearish Dark Cloud Cover Candlestick chart pattern acts as a downside reversal pattern that will generally form at the end of a prolonged up trend or during a corrective rally in a downtrend.
The exchange rate for the currency pair gaps higher on the opening of the second day only to attract more selling interest. This thereby causes the currency pair's rate to decline sharply to fill the gap.
The bulls have been in control until the second day of the Bearish Dark Cloud Cover pattern, when selling interest is sparked by the gap up as the bears quickly move in to take advantage of the higher rates which contributed to some of the previous day's losses.
Moreover, the success the bears have had in selling down the currency pair, and the fact that its exchange rate has closed below the mid point of the previous day's white candle fuels even more bearish sentiment for the pair.
The Bearish Dark Cloud Candlestick chart pattern has similarities to the Bearish Engulfing pattern, the Bearish Thrusting pattern and the Bearish Meeting Lines pattern.


How a Trader Takes Advantage of the Bearish Dark Cloud Cover Pattern


The Bearish Dark Cloud Cover Candlestick chart pattern would typically be traded by shorting the market on the second day after the currency pair's rate has declined past the middle point seen on the white candle day.
Naturally, forex traders need to remember that the position will have inherent risk, since the Bearish Dark Cloud Cover Candlestick chart pattern is only a moderately reliable downside reversal pattern.
As a result, those traders who are more adverse to risk might want to wait for further confirmation of the new downward trend indicated by the appearance of a Bearish Dark Cloud Cover Candlestick chart pattern by waiting for a long black candle day to initiate a short position.

Mubarak Ends His Presidency, Protestors Leave Tahrir Square

After Egypt`s Hosni Mubarak agreed to step down as President past week, and handed over his powers and responsibilities to the Egyptian Army, the situation in the country appears to have calmed to a large extent, with the Tahrir Square, the stage for tens of thousands of people demonstrating against the regie for the past weeks, presently being occupied by a tiny group of just 50 people demanding an immediate end to the state of emergency in place. Most of the opposition is satisfied with having achieved its main purpose, the toppling of Hosni Mubarak, and is now preparing for the difficult process of elections in which they will be competing against each other for favor from the Egyptian people.

Bahrain, a wealthy Guld state in the Persian Gulf region was meanwhile the stage to new protests today as the country`s oppressed Shiite majority demands stronger representation and more rights. Bahrain is unique among Gulf Arab States in having a majority of Shiites with strong cultural and ancestral relations with Iran, and it is widely regarded as the most vulnerable among the region`s wealthy nations to some kind democratic upheaval. The Western-oriented, modernizing Sheikh of the country was optimistic about the future of his country, and pragmatic about the opportunities and risks created by the turmoil in today`s comments, but seeing that he owes his position to having toppled his father in a suprise bloodless coup in the 90s, he should know only too well the fluid and unstable nature of Middle Eastern politics and their implications for his and his family`s survivability.

Moving on to markets, we recognize that all these events will have their positive reflections in the commodities market. Still, it seems that this sector is ripe for a pulback after prices breach short- and long-term resistances in spite of seasonal patterns that should see corrections during the first half of the year. Silver, gold and cotton are reported to have touched multi-month highs in of CFTC numbers, apparently boosted by general supply concerns on the back of potential turmoil in the crucial Middle East region. But we think that the markets have outbidded themselves a little on this particular issue, and with interest rates rising, and the Egypt crisis out of the radar for now, the conditions for a pullback may well come into place soon.

Should we expect the bull momentum to be sustained beyond this month perhaps into the second half of 2011? One way or the other, we know at least that Ben Bernanke`s Federal Reserve is never too far around the corner if the market action shows a degree of weakness that can have adverse consequences for unemployment. We know that the economy has been doing reasonably well since October, a short time after the Fed Chief unveiled his bond purchase plans. We know at the same time that inflationary pressures in much of the developing world are at levels that would challenge credibility of authorities, and call for rapid and convincing reaction if price trends are to be kept under contol.

With these two forces, largely driven by central banks and amplified by speculators continuing to define market trends, we believe that a near-term correction may be inevitable, but that the period stretching to the end of the Obama Presidency probably presents a good scenario for continued bullishness. Middle East events show the fragile nature of such conjectures, but as long the geopolitical situation remains under control, the grounds for (market) optimism remains in place.

PIMCO Shifts Out of U.S. Treasuries, Should We Shift Out of the USD, too?

PIMCO`s Bill Gross has published its February Investment Outlook at the company`s website where he is making the case for an exit from U.S. government debt in favor of non-U.S. developed nations. His arguments, while passionately argued, are neither new nor innovative, but they make a good reading as they are being presented in a coherent and complete form.

His case is a familiar one in that it focuses on the distortive impact of govenment action on the functioning of free markets and risk pricing. With respect to the recent economic situation, he laments the new role played by "money" as the main determinant of economic trends and momentum versus the traditional function as the medium through which such trends would be communicated, activated and rebalanced in time. While we agree to most of his commentary, we dissent that the significance of these events go beyond the short-term fluctuations of his favored markets, and as they are built on paradoxes, they may sustain themselves in a seemingly cooperative fashion with old-fashioned risk aversion in spite of our protests and puzzlement. In other words, it is possible to see U.S. Treasuries favored even as inflation rises, not because it makes sense, but because the whole system is unsustainable from multiple angles and there is not particular reason for a correction in one aspect as long as the other sides of the puzzle remain in place. If the Chinese can still inflate their bubble, why can`t the U.S. do the same?

Bill Gross is said to be directing his fund to gradually reduce its exposure toU.S. Treasuries, with the latest numbers showing a government position at about 12 % vs. December`s 22%. He has never been a great bull on government paper, and at the height of the Bear Sterns bailout, or in the prelude to the Lehman event, he is on record as saying that Treasuries are not right place to be in light of all the risks and dangers that U.S. economic policy entails. His prognostications have not been fulfilled so far not because there is anything wrong with his analysis, but because the air of moralism, or righteousness adopted by him his kind lacks a basis in reality when contrasted with facts. It is impossible to imagine anyone being right in this system, at it makes no sense to blame the Fed or the Chinese government alone for what has been the most comprehensive and cooperative speculative craze of human history. When we speak of the collapse of 2008, or the recent bubbles still being popped in the EM world, we are speaking about the purchases of retirees, speculations of pensioners, and the overinvestment of conservative industrialists as much as we are talking about leverage, or hedge funds, or financial engineering. In that sense, the idea that one can take a moral, or commonsense position and justifiably criticize the Fed, for instance, from a safe and immune vantage point is nonsensical. Not even gold buyers can defend their actions on the basis of rationality since gold has been in the speculative red-zone for quite some time. We do not believe that there is a safe haven, because the journey must continue, the movement must not stop in order to mask the contradictions in the system.

Time will tell if Mr. Gross is right or wrong. But we are skeptical, also because the alternatives that he seems to propose in the developed are hardly any better than anything that the U.S. government can offer. Is Europe, or Japan pursuing more sensible policies nowadays than the Americans? We won`t tire the reader by repeating the well-understood problems of these nations, but whatever they are, they should be enough to make any of us question the wisdom of U.S. doomsayers regardless of the political camp, or the economic philosophy envisioned.