What is a Dark Cloud Cover?
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.
TIP If the second candlestick does not break below the middle of the first it could just mean the stock is experiencing a little pullback. If you use this pattern make to combine it with many other indicators. Other Candlestick Patterns There are plenty of other patterns which give you important buy and sell signals for the price of the stock. If you are looking to get good at short term trading learning these big trading signals can help you to understand the market much better. Evening Star - A bearish reversal signal. This pattern consists of 3 separate days Hammer Pattern - This simple 1 day pattern marks the end of a downtrend Bullish Kicking - A very reliable bullish indicator
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