How to Make Money Trading with Candlestick Charts

Dark Cloud Cover signal in
overbought conditions in Allahabad Bank
A huge surge in buying can be seen from the
volume on the day before the Dark Cloud
signal. Notice that conditions were already
overbought as indicated by the stochastics.
Figure 7.8
 shows the chart of Aegis Logistics

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Ltd.
Figure 7.8:
Aegis Logistics drops like a
rock following a Dark Cloud signal
The stock had run up from 
`
230 level to the 
`
300 area. The bulls were getting excited.
They gapped the prices higher, but could not
sustain the momentum. Notice the climactic

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volume surge. What followed the Dark
Cloud Cover was almost a 180 point drop.
Look at the chart in 
Figure 7.9
. Try to
analyze it from a technical trader’s
perspective.
Figure 7.9:
Dark Cloud Cover signal

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confirming previous resistance in SAIL
Can you see the Dark Cloud Cover signal?
Now trace back an imaginary horizontal line
to the month of May and notice another
candlestick signal (
Hint:
see previous
chapter). This is a trader’s delight. When one
signal corroborates another signal at a
previous resistance point, the probabilities
are extremely high that the trend has
reversed. 
Chapter 10
 will go in detail about
using support / resistance lines.
Figure 7.10
shows another Dark Cloud
Cover.

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Figure 7.10:
Dark Cloud Cover in Birla
VXL
In May 2005, all the ideal conditions had
lined up for a trend reversal in Birla VXL:
Stochastics in overbought condition;
There was exuberant buying as

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represented by large bodied candles;
Dark Cloud Cover signal.
As a candlestick trader, you are now seeing
the market as a game of greed and fear. You
are visually training your eyes to detect the
panic and exuberance of other novice
traders. Let me emphasize again the fact that
these signals have been tested for about four
hundred years by the Japanese. Have
confidence in them.

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8
The Harami
The Harami is another potent two-day
reversal signal. The Japanese have named it
Harami because of the way the signals looks,
as though depicting a pregnant women with
her belly sticking out.