What is a dark cloud cover Candlestick?

The Dark Cloud Cover pattern is used by many traders to spot reversals in the market and achieve favorable risk to reward ratios. It is fairly easy to spot, however, traders need to view the formation of the Dark Cloud Cover candlestick in conjunction with other crucial factors and avoid simply trading as soon as the pattern appears.

What is the dark cloud cover pattern?

The Dark Cloud Cover pattern is a candlestick pattern that signals a potential reversal to the downside. It appears at the top of an uptrend and involves a large green (bullish) candle, followed by a red (bearish) candle that creates a new high before closing lower than the midway point of the previous green candle.

How do traders use dark cloud cover?

Traders may use the dark cloud cover to inform their selling decisions. A trader can potentially exit a long position upon observing a dark cloud cover pattern. Or, the trader may pay more attention to a security that has exhibited such a pattern and wait for confirmation on whether to exit that position.

What is a bearish dark cloud cover?

A bearish dark cloud cover begins when an asset price has been increasing for some time but suddenly takes a turn and starts falling. This is the bearish reversal. It is predominant in initiating the cover. A reversal in the stock market means a change in the direction of an asset’s price.