What is a Dark Cloud Cover?

Stock market picks. Swing Trading


A Dark cloud cover is a bearish reversal pattern. It can mark the top of a bull run and be the beginning of a crash of the security.

This pattern takes place with two different candlesticks. The first candlestick is an up day. During this day the bulls take control and push the stock upward.

The second day the stock opens above the close of the last day. During this day the stock falls fast. It ends up closing below the middle of the first candlestick. This is a signal that the bears are starting to take control of the security and might push it down further.

Why is does the second candlestick have to break below the middle of the first? Many professional swing traders will consider the middle of a big candlestick to be a support level. If it breaks that level it has just broken support which is a bearish indicator.

Below is an example of what a dark cloud cover looks like.