The candles of the pattern are ringed. An invented chart, drawn to show the shape. Not market data.
Also searched asdark cloud pattern · dark cloud candle · bearish dark cloud cover
How to recognise a dark cloud cover
- A long rising candle, then a falling one.
- The second opens higher than the first one’s high.
- The second closes below the midpoint of the first body, but above its open. A close below the open would make it a bearish engulfing pattern.
What it is taken to mean
It is read as buyers opening the period at a new high and being unable to hold it, with sellers taking back more than half of the previous period’s gain. Traders treat it as a warning about the rise, not as its end.
What traders check next
- Whether there was a real rise before it.
- Whether it formed at a level that has stopped the price before.
- The next candle: a close below the first candle’s open, or a return above the second candle’s high?
Where people go wrong
- Expecting the opening gap on a chart of a currency pair, where it is rare within the week.
- Counting a shallow close, above the midpoint, as the pattern.
- Selling a strong, orderly rise because of two candles. Rises pause in this way often and carry on.
Questions people ask
- Dark cloud cover or bearish engulfing?
- In a dark cloud cover the second candle closes inside the first body. In a bearish engulfing pattern it closes below the first body altogether.
- Does a dark cloud cover mean the price will fall?
- No. It describes what buyers and sellers did during those candles. Studies of candlestick patterns find that, taken alone, they predict the next move only a little better than chance, if at all. It is one observation to weigh with others.
The words on this page
An explanation for study. It is not advice, a recommendation or a forecast, and a pattern or a situation described here says nothing certain about what a price will do next.