Question: What is the proper strategy when Dark Cloud Cover pattern appears in Candlestick chart?
Here is an example of strategy when you see the appearance of a Dark Cloud Cover pattern filtered by RSI at the overbought area, during the course of an uptrend (or upward correction).
Consider selling when the next candle falls below the low price of the long white candle.
Consider placing a protective stop-loss at the top of the Dark Cloud Cover.
Take-Profit strategy is heavily dependent on the trading profile of each individual:
- Close the position when the price reaches the SMA(20).
- Close 50% of the position when price travels 100% the length of the Dark Cloud Cover pattern then close the remaining 50% when price reaches the SMA(20).
- Other combinations may be applied.