KLine Analysis Lesson 27: The Dark Cloud Covering the Top of Reverse Form

The dark cloud covering the top is a signal of a bull turning bear reversal, which is exactly the opposite of the "piercing line" shape introduced in the previous lecture.

Recognition Rule
1）The market has been on a rising trend, with a big positive line the day before the appearance of the dark cloud covering pattern;
2）The next day is a large negative line, whose opening price is higher than the highest price of the previous day's positive line (note that it is the highest price, not the closing price);
3）The closing price of the next day's big negative line must be lower than the midpoint of the first day's big positive line entity;

Psychological Analysis
The pattern of dark clouds covering the top usually appears in an upward trend. The first day's positive line indicates that the market is still under the control of multiple parties. The second day, the market first opens up with a short jump, then gradually dips downward, and finally closes at the physical midpoint of the previous day's positive line. In this market situation, bulls begin to consider whether their strategies are correct, and the power balance between long and short sides will break the original balance and readjust. Similar to piercing lines, dark clouds covering the top are very typical signs of trend reversal.

Related Forms
The shape of a dark cloud covering the top is exactly the opposite to that of a piercing line.

Practical Application

2010year11month22dayLaibao High Tech(002106)After two consecutive days of skyrocketing before, the same day continued with49.21Yuan Gaokai, but the good times are not long, in the morning10Set a new historical high around midnight50.36After the yuan, the stock price began to turn downward until the closing price fell4.97%All day amplitude exceeds10%The trading volume sharply increased, and although there was a rebound after the decline, it did not reach a new high, and the overall trend also shifted from an upward trend to a downward trend.

*Risk statement*
KLine analysis is only an indicator tool used to judge the strength of buyers and sellers in the market and market sentiment. How to identify and study is subjective to some extent, and it needs to be determined in combination with volume and other factors. It may not be completely accurate to judge the future market. Many fundamental investors never analyzeKChoosing to hold high-quality individual stocks for a long time has also resulted in significant returns. Please evaluate for yourself whether and how to use itKLine tool.