Dark Cloud Cover

The Dark Cloud Cover is one of the most popular candlestick patterns.

Its first candlestick should be a white candlestick that appears as a long line.

The second candlestick is a black candlestick that appears as a long line. The opening price of the second candlestick should be higher than the high of the previous candlestick. However, it is acceptable for these two prices to be equal. The close of the second candlestick should be below the midpoint of the first candlestick, but not lower than its open.

The Dark Cloud Cover is a classic bearish reversal pattern, which appears at the end of an uptrend. After defined increments, the second candlestick of the pattern opens creating a price gap, however, it closes below the midpoint of the previous candlestick, demonstrating the weakness of the market.

The reliability of the pattern is higher if the trading volume increases on the second line. Like any other pattern, it should be confirmed by subsequent candles. Confirmation can be for example in the form of a break of a support level or a trend line.

If the pattern has managed to reverse an uptrend, its second candle creates a strong resistance zone.