stinction is。not that important。 What is。important is。the price movement in the next session； the same as。for a spinning top or harami。
If a shooting star appears。near the top of an uptrend and the next day produces。a large black。candlestick； it is。a shooting star on the eve of three rivers—and a decisive top signal； if it is。followed by an engulfing pattern （tsutsumi）； it is。also a top reversal signal because the stock。is。being 〃carried for the last time”。 Similarly； alter a downtrend； a gravestone followed by a three rivers。pattern would be a decisive bottom signal； whereas。an engulfing pattern means。that the stock。is being 〃picked straight up”。
Both upper shadows and lower shadows can indicate tops。or bottoms。 It's。more mon for a long lower shadow to appear after a downtrend than an uptrend； and likewise a long upper shadow is。more mon alter an uptrend than a downtrend。 In other words； a takuri is。more mon than a hanging man and a shooting star is。more mon than a gravestone。
Another classic。pattern near the top of a trend is。the dark。cloud cover （kabuse）。 This pattern often is。seen when the market is。in an uptrend and thought to be continuing upward but when it appears。near the top； it should be interpreted as a warning sign。 The inversion of a dark。cloud cover is。the piercing pattern （kirikomi） which appears。near the bottom and indicates。the market is。bottoming out。 Although they differ in their bullish and bearish indications； these patterns。have exactly the same psychology at work in their production。
Dark Cloudver
In this。pattern； a paratively。large white candlestick。is。followed by。a black。candlestick。that opens higher than the white candlestick's。close （higher than the top of its real body and resembling a dark。cloud on top of the white candlestick）。 If a large black。candlestick。is。formed near the top and extends。below the median price for the previous。day。 it usually indicates a reversal。 However； if the next day's。price exceeds。the black。candlestick's。high； the dark。cloud cover has。broken and the uptrend monly accelerates。 （Figure 4。13）
There are other variations。on dark。cloud cover； depending on the degree of coverage。 Some examples。include atekubi； sashikomi； and irikubi； but they can be considered to have the same basic。meaning。
A fairly convincing argument can be made about the formation of dark。cloud cover and the reason the psychological state among market participants。leading to it results。in the formation of a top。 Here's。what happens： The market is。in an uptrend； and a fairly large white candlestick。is。formed。 If the session closes。at or near the high； most people believe that there will be more gains。the next day because this。stock。still has。a long way to go。 If it does。indeed open higher the next day； it would not be unmon to think。that the bulls。will crowd in because their anticipation has。been confirmed。 In some cases； there is。a window or gap （see Figure 4。22） that is。opened and the price continues。to soar。 But what if that doesn't happen？ The stock。has gapped significantly higher； but at （or near） the high； it begins。to slide。 More investors。decide that this。must be the end； and the decline accelerates。 If the market is。indeed still bullish； the decline should stop at the previous。day's。high or close； but if it breaks。through the previous。day's。close and still does not stop； more selling piles。on。 At the end of the day； the stock。closes。far below the previous。day's。close and investors。ask。themselves； 〃What were yesterday's。gains。all about anyway？〃 A top has。formed。 If； on the third day； the stock。opens。even lower； then the worst has。been confirmed and more shares。are dumped； as。it to corroborate the peak。
If these two days。of movement were pressed into one； it would produce an upper shadow or a lower shadow—the same shape as。a shooting star or hanging man。 This。is。yet another and very convincing reason why dark cloud cover is。a pattern that indicates a top。
The Piercing。Pattern
In this。pattern； the first day has。a large black。candlestick。followed on the second day by a large white candlestick； extending above the middle of the black。candlestick。 Often the pattern indicates。that the selling is。over； a long downtrend hase to an end and an upward reversal has。begun。
This。pattern is。exactly。the opposite of dark。cloud cover。 The price has。been sliding downward； and there is。a large black。candlestick。causing most people to think that the stock has。even farther to drop。 If； in the midst of this。market sentiment； the stock。opens。significantly lower； most people might think。that it's。heading farther down and bee bearish。 However； if the opening is。actually at （or near） the bottom and the price starts to rebound； investors。who sold short begin to buy back their positions； and bargain hunters。decide that they had better jump in quickly； amplifying the rebound so that the stork。closes。significantly higher than it did the previous。day and participants。perceive it to have bottomed out。
It may be easier to understand this。if the two days’ movement ispressed into one。 A large decline followed by a higher close will produce a long lower shadow； and this。shape—appearing at or near the bottom—is。the same as。a takuri and usually marks。the bottom of the trend。 （Figure 4。14）
In a piercing pattern； the first day hits。a large black。candlestick； followed on the next day by a large while candlestick。that extends。above the middle of the black。candlestick。 An inverse to dark。cloud cover； the pattern often indicates。that the selling is。over； a long downtrend hase to an end and an upward reversal has。begun。
The Engulfing。Pattern
This。pattern is。sometimes。referred to as。tsutsumi or daki （hug）。 A candlestick。with a small real body is。engulfed by a larger candlestick； resembling a mother hugging her child。 In other words； the first day is。white and the second day is。also white； and the second day。has。opened below the first day's。open and closed above the first day's。close。 Regardless。of whether white or black。candlesticks。are involved； the key characteristic。of the engulfing pattern is。that the real body of the second day is。larger on both the top and bottom than the real body of the first。 Were the two days’ movement pressed into one； it would form a long upper shadow or lower shadow； which makes。it easy to understand why it is。a top or bottom reversal。
If； at or near the top； a large black。candlestick。engulfs。the previous。day's。smaller can…dlestick； it's。not surprising that this。would mark。the peak； but a large black。candlestick。near the bottom of a downtrend； which would seem to indicate further declines； often marks。the bottoming…out point。 Similarly； a large engulfing white candlestick。at or near the bottom of a downtrend is。easily taken as。an indication that prices。have bottomed out； but it is。surprisingly mon for this。same engulfing white candlestick。to mark。the top in an uptrend （see Figure 4。15）。
Harami
In the harami pattern； a large candlestick。of either color is。followed by a smaller candlestick； resulting in a shape that resembles。a pregnant woman （which is。the meaning of harami）。 Harami is。another reversal pattern； the child is。seen as。separating from the mother （see Figure 4。16）。 When this。pattern appears。at or near the top of an uptrend and consists。of a large white candlestick。followed by a small white candlestick。（white/white harami）； it is mon for the trend to break。downward； marking a peak。 Conversely； when this。pattern appears。at or near the bottom of a downtrend and consists。of a large black。candlestick。followed by a small black。candlestick。（black/black。harami）； it ismon for the trend to break。upward； marking a trough。
Harami pattern is。the opposite of an engulfing pattern。 Price movements。are entirely within the range of the previous。day。 The question is。not really whether they are white candlesticks。or black。candlesticks。 The decision to sell or buy depends。on where the pattern is。seen （near the top or near the bottom）。 The first day's。candlestick。isnsidered the mother； the second day’s。is the child she carries。 A reversal in the trend is。very mon when the child is。a doji。 Market wisdom says to follow the break。with a harami。 If either the previous。day's。high or low is。exceeded； the trend usually continues。in that direction。
Whether the shadows。are included in the large candlestick is。disputed。 Some argue that the shadows。should not be included in either the mother or the child； others。believe that for the mother （the large candlestick）； the shadows should be included； whereas。for the child （the smaller candlestick）； they should not be included。
Figure 4。17 shows。the kind of price movements。likely to produce a harami pattern； which is。the same as。the triangle； or pennant pattern in other forms。of technical analysis。 The lop is。flat and the bottoms。keep moving higher； or the bottom is。Hat and the tops。keep moving lower； or the bottoms。rise and the tops。fall at the same time within a limited range of movement。 In the triangle pattern like that in Figure 4。17； the break es。when the price breaks。through either the upper resistance line or lower resistance line。
Therefore； if a harami appears。in an uptrend and breaks。downward the next day； the price tends。to keep falli