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Tutorial on Dark Cloud Cover Candlestick Pattern

What is Dark Cloud Cover Candlestick Pattern?

The Dark Cloud Cover Candlestick Pattern is a bearish candlestick reversal pattern, of moderate reliability and is formed at an uptrend, or at a possible resistance. This pattern is just opposite of Piercing line candlestick pattern. This pattern consist of two candlestick or one can say it takes two days for this pattern to formed.

Day 1: Day one candlestick is the continuation of the uptrend therefore bullish in nature and it has little significance by its own formed in a uptrend.
Day 2: On Day two a bearish candlestick is formed, which almost covers half the body of the bullish candle formed on Day 1.
Dark Cloud Cover got its name because its looks like a dark cloud over a brightly going uptrend.

For this pattern to be valid it is extremely important:

1. The open price of the Day 2 candlestick is higher than the close price of Day 1 candlestick.
2. The close price of the day 2 candlestick must close below the 50% of the body of the day 1 candlestick. That means it should cover atleast half of the body of Day 1 candlestick.

Though this pattern can occur anywhere like in uptrend, downtrend, sideways market etc., but it is only valid and reliable when formed in an uptrend. Piercing Line Candlestick Pattern is an indication that the bulls is losing its control and bears are taking over it. However one has to wait for the third day, for this pattern to confirmed.

The Strength of this pattern is maximized, if the day two candlestick covers more than the 50% of the bearish candlestick formed on Day 1. The more it covers more strong is the bearish signal. The formation of bearish candle, or a gap down on third day further confirms this pattern reliability.

As always mentioned, by combining chart patterns with other technical indicators wave out any false signal if any,generated. Therefore adding any one of the other indicators like volume, Stochastic, RSI, MACD etc. with Candlestick patterns, one can further enhance the probability of the pattern to happen.

Now we have learnt what is Dark Cloud Cover Candlestick Pattern, it is the time to see them in real life. Our website provides free Stock screening based on Dark Cloud Cover Candlestick Pattern. It can be found at this link.

Corresponding Patterns of Dark Cloud Cover Candlestick Pattern is as follows:
1. Bearish Engulfing.
2. Piercing Line.

Example of Dark Cloud Cover Chart Pattern

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Different Bearish Candlestick Pattern Stock screening can be found at:

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