Dark Cloud Cover Patterns

Dark Cloud Cover Pattern

3 min read

Dark cloud cover patterns are two candlestick patterns found at the top of uptrends or near resistance levels and signal a reversal to the downside. The second bearish candle covers up to half of the first bullish candle. Look for price action to fall below the second candlestick and hold to confirm bearish continuation. 

A dark cloud cover pattern consists of two candlesticks that form near resistance levels where the second candle covers half or part of the first candle. Typically, when the second candle forms, it cannot hold above the first candle and causes a failure.

These patterns are three candlestick patterns. This pattern can signal a bearish reversal in a bullish trend.

Dark cloud cover patterns form when a bearish candlestick forms a “dark cloud” over a bullish trend. The bearish candle opens above a bullish candle’s close with a confirmation candle forming; hence the three candle pattern.

Dark Cloud Cover Patterns

The bulls push price higher at the open but the bears ultimately took over. This causes the price to be pushed lower and the bears are in takeover mode.

This takeover is a sign that there could be a bearish reversal coming. The dark cloud cover is a sign of an impending storm. A dark cloud cover pattern is made stronger if the candle closes below the low of the confirmation candle; from there price can move down.

How to Trade Dark Cloud Cover Patterns

  • Watch for 1st top candlestick to form
  • Next, watch for 2nd candlestick to cover half or part of 1st candle
  • Then, watch for 3rd candlestick to fall below 2nd
  • Traders take a short once price breaks below the 2nd candlestick
  • Place stop at top of the 2nd candle
  • Some traders take a long position once price breaks above 2nd candle
  • Then place stop below the 2nd candle

Technicals

There are five different things dark cloud cover patterns need. First need to find an existing bullish trend. Cannot have a bearish reversal takeover without a bullish trend in place.

Next, a bullish candlestick within the uptrend is needed. This is the first candle in the dark cloud cover pattern.

Third, the second candle should begin the day gapped up. When traders see that at the open they might be inclined to think it part of the gap up patterns and go bullish. Unless they caught it the day before and sold at the open, more than likely are going to be disappointed.

Fourth, the reason for disappointment is because the gap closes and turns into a bearish candle. Bulls started the day in control but the bears came in and closed the gap driving price down.

Last and the 5th thing, the bearish candle should close below the midpoint of the bullish candle from the previous day. Those first 2 candles should have long real bodies with little to no wicks.

Related Articles

Failed Bear Flag

Failed Bear Flag

A failed bear flag turns into a bullish pattern instead of a bearish one. When learning about flags, a bear flag is always a bearish

Read More »
Heikin Ashi

Heikin Ashi

Have you ever wondered, “What is heikin ashi”? Well, you’re in good company; I had no idea either until I started trading. What I found out

Read More »
Megaphone Patterns

Megaphone Pattern

The megaphone pattern is another chart pattern used for technical analysis. This is one of my favorite patterns because there is usually a lot of

Read More »

Claim your 100% FREE Trading Courses. This is strictly for people who are hungry  for knowledge. We’ll teach you how to trade!

Rated Best Value by Investopedia

FREE ONLINE TRADING COURSES

If you’ve looked for trading education elsewhere then you’ll notice that it can be very costly.

We are opposed to charging ridiculous amounts to access experience and quality information. 

That being said, our website is a great resource for traders or investors of all levels to learn about day trading stocks, futures, and options. Swing trading too! 

On our site, you will find thousands of dollars worth of free online trading courses, tutorials, and reviews.

We put all of the tools available to traders to the test and give you first-hand experience in stock trading you won’t find elsewhere.

Our content is packed with the essential knowledge that’s needed to help you to become a successful trader.

It’s important to treat day trading stocks, options, futures, and swing trading like you would with getting a professional degree, a new trade, or starting any new career.

Invest the proper time into your Trading Education and don’t try to run before you learn to crawl. Trading stocks is not a get-rich-quick scheme. It’s not gambling either, though there are people who treat it this way. Don’t be that person! 

STOCK TRADING COURSES FOR BEGINNERS

The Bullish Bears team focuses on keeping things as simple as possible in our online trading courses and chat rooms. We provide our members with courses of all different trading levels and topics.

If you’re a beginner, intermediate level, or looking for expert trading knowledge…we’ve got you covered. 

We have a basic stock trading course, swing trading course, 2 day trading courses, 2 options courses, 2 candlesticks courses, and broker courses to help you get started. Free.

Just choose the course level that you’re most interested in and get started on the right path now. Become a leader, not a follower. When you’re ready you can join our chat rooms and access our Next Level training library. No rush. We’re here to help.

Click Here to take our free courses.