DARK CLOUD COVER CANDLESTICK PATTERN

A bearish reversal candlestick pattern in which a down candle (usually black or red) begins above or near the close of the preceding up candle (often white or green), and subsequently closes below the up candle's midway. The pattern is notable because it signifies a change in momentum from up to down. An up candle is followed by a down candle to form the pattern. On the next (third) candle, traders expect the price to continue to fall. This is referred to as confirmation.

• Following a price climb, Dark Cloud Cover is a candlestick pattern that suggests a shift in momentum to the downwards.
• A bearish candle begins above but finishes below the midpoint of the previous bullish candle to form the pattern.
• Both candles should be reasonably large, indicating that traders and investors are actively participating. When little candles are involved, the pattern is usually less striking.
• Traders look to check if the candle that follows the bearish candle likewise displays price declines. A continuation of the price decrease after the bearish candle is referred to as confirmation.

The market begins with dark cloud cover in an upward price trend, with bulls pushing the price higher. When price gaps open higher than the previous day's top, a tall green candle appears, indicating more increases, and the next day cooperates. The bears, on the other hand, seize control, and selling pressure forces the price to close around the day's low, completing the candle.

Consider the following facts to ensure that the candlestick pattern is 'dark cloud cover.'

• The market is on the rise.
• A tall green candle is the first candle.
• A tall red candle with an open above or near the preceding high and a close below the midpoint of the previous day's body is the second candle.

Green and red candlesticks with lengthy real bodies and short or non-existent shadows are another feature of the Dark Cloud Cover pattern. In terms of price movement, these characteristics show that the move lower was both definite and significant. Traders may also seek confirmation in the form of a bearish candle that follows the pattern. The price is predicted to drop after the Dark Cloud Cover, but if it doesn't, the pattern is likely to collapse.

The Dark Cloud Cover pattern is only considered beneficial by most traders if it happens after an upswing or a price increase in general. As prices climb, the pattern becomes increasingly relevant for identifying a possible negative move. The pattern is less noteworthy if the price action is choppy since the price is likely to stay choppy following the pattern.

The bearish candle's close can be utilized to close long holdings. Alternatively, if the price continues to fall, traders may decide to depart the next day (pattern confirmed). A stop loss can be put above the high of the bearish candle if entering short on the close of the bearish candle or the next session.

A profit objective for a Dark Cloud Cover pattern does not exist. Other approaches or candlestick patterns are used by traders to determine whether to terminate a short trade based on Dark Cloud Cover.

• When there is a short-term rising price trend, avoid trading black cloud cover. Price may reverse, but the odds of a persistent downturn, especially in a bull market, are stacked against you.
• Look for pricing to close lower the day after the candle finishes to assist spot a reversal. This works more than 80% of the time, however it doesn't specify how much the price will reduce.