Both days close at the same price After an uptrend, the second days candle open above the previous close. Even though the second day had rallied during off-exchange hours and opened high, a sell-off brings the close near the previous day closed. Figuratively meeting the lines of close prices. This typically means the bull trend has been weakened and a reversal is possible.
Psychology and Confirmation In many ways this is a typical clear-cut bearish reversal pattern. The market has been trading up for sometime. We see a big bull rally on day-one setting benchmarks for the current rally. Then between when the exchange closes on day-one and when doors reopen on the exchange day-two, the market has continued to drive price up. Day two sees a sell-off signaling a reversal in trend. Longs would be looking to par off their positions and Candlestick analysts will be watching for short opportunities. But like most moderate strength reversals, traders like to see confirmation the next day. This formation may be fairly typical in a range bound market; Meeting Line is most significant after a protracted bull trend. Meeting Lines less reliable than Dark Cloud Cover The bearish Meeting Lines pattern is similar to the Dark Cloud Cover pattern. With Dark Cloud Cover patterns, the off-exchange rally it not nearly as high, suggesting weaker buying strength. The move down with Dark Cloud Covers is far deeper, suggesting sellers in the patter have more strength than with this pattern. Thus Dark Cloud Covers are more reliable. Meeting Lines Translated Into FX As illustrated above, the bearish Meeting Line is not possible in FX markets. Because the Forex Market offers 24 hour trading, gaps seen between day-one and day-two are not really possible. But clearly the same price action is possible, in FX the open price on day-two would match days ones close. Thus instead of seeing a large red candle on day two FX traders following the same price action would see a Gravestone Doji, moderate strength reversal.
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