Term: Dark Cloud Cover
Type: Candlestick pattern
Used in: Technical analysis, stock charting
Also Known As: Bearish reversal pattern

Definition

Dark Cloud Cover is a two-candle bearish reversal pattern seen in technical analysis. It typically forms at the top of an uptrend, suggesting a possible downward reversal in price.

The pattern consists of:
– A long bullish (white/green) candle
– Followed by a bearish (black/red) candle that opens above the previous high but closes below the midpoint of the first candle’s body

This signals that buyers were strong, but sellers regained control, indicating potential trend exhaustion and a bearish shift.

Key Features

• Appears after an uptrend
• First candle: large bullish
• Second candle: opens higher, closes deep into the first
• Signals bearish sentiment gaining control
• Often confirmed by a third candle closing lower

Common Use Cases

• Used by traders to identify potential trend reversals
• Setting up short positions
• Placing stop-loss or exit orders
• Evaluating overbought market conditions

Benefits or Advantages

• Simple visual identification
• Useful for timing entries and exits
• Can be applied across stocks, forex, crypto
• Works well with volume or momentum indicators

Examples or Notable Applications

– Common in daily or weekly charts
– Best when followed by high-volume bearish candle
– Often used with RSI or MACD for confirmation
– Not reliable in sideways or low-volume markets

External Links

• Investopedia: Dark Cloud Cover
• TradingView: Dark Cloud Cover Chart Patterns
• StockCharts: Candlestick Basics

This post is for educational purposes only and does not constitute investment advice.