A dark cloud cover is a bearish
reversal pattern that signifies weakening buying pressure. The
pattern involves the body of a red candle closing within the body of
the previous green candle. Graphically, this pattern shows that
despite a strong session, the currency pair is meeting resistance at
higher levels. If the green candles does not close at least halfway
into the body of the red candle, traders need to be careful with
formation, as it may be giving a false signal. In such cases, it is
probably prudent for traders to wait for a trend reversal
confirmation in the next candle. The deeper the second candle covers
the first candle, the stronger the signal. In conclusion, The Dark
Cloud Cover pattern is distinctly bearish as prices first make new
highs but end up closing below the middle or prior
candles's range.
The chart below shows a dark cloud formation.
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| Dark Cloud Cover |
Dark Cloud Cover Quiz
Dark Cloud Cover Pattern Quiz
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