Dark Cloud Cover candlestick pattern

The Dark Cloud Cover is two candles candlestick pattern. It is a classic reversal formation.

The candlestick pattern signifies a shift in the balance of power during a specific trading period, where sellers gain control and push the price down towards the first candlestick body. This indicates selling pressure at a resistance level, suggesting a potential uptrend.

The Piercing Pattern is the bullish counterpart to the Dark Cloud Cover. In this case, the first candle of the formation is a red candle with a long body. The following green candle opens below the low of the previous candle, but rises significantly in the course of trading. Both formations are relatively rare.

Construction

1st

• continuation of uptrend
• red body
• green body with no or very small shadows

2nd

• red body without or very small shadows
• open above high price of 1st candlestick^①
• closing price is within body of 1st candlestick (ideally, below middle of 1st candlestick’s body)^②

You should pay attention to the volume when this pattern is formed. The pattern should be preceded by an upward movement. This is an indication of strong buying activity in the market.

A further price decline following the bearish candle is called and used as confirmation for the triggered pattern.

Stop loss can be placed at the high of the candlestick pattern (2 candles).