Dark Cloud Cover

What is it?

The Dark Cloud Cover pattern has a very descriptive name as it sounds like the clouds are building, and a rainstorm is coming which is exactly the way the Japanese interpreted this pattern. Japanese traders believed when you see a dark cloud cover formation; you should get ready because the rains are about to fall in the form of a bearish move.

The Dark Cloud Cover is similar to a bearish engulfing in the sense that it is a 2-candle line pattern where the first candle is white, and the second candle is black. The first candle is typically an average or long day candle while the second candle gaps up to start the day, but then trades bearish and closes at least halfway into the first candle.                                                                      

Where is it?

This pattern, when found at resistance, consistently leads to a bearish swing or a full-on reversal.

​What Should I Do When I See This Pattern?

Like most two candle patterns, when you see the Dark Cloud Cover, you should:

• Tighten your stops
• Consider exiting your bullish trades
• Look for a bearish trade confirmation to switch to a short or bearish trade
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