Dark Cloud Cover

What is the Dark Cloud Cover?

Dark Cloud Cover appears at the top of an uptrend. Two candles:

Candle 1: A long bullish candle continuing the uptrend. Candle 2: Opens above Candle 1's high (gap up in markets that gap; open above the close in 24-hour markets like forex). Then sells off to close below the midpoint of Candle 1's body.

The pattern shows buyers attempted to extend the rally — and were decisively rejected. Weaker than Bearish Engulfing because the close is only at Candle 1's midpoint, not all the way through the body.

How to identify a Dark Cloud Cover

Requirements:

1. Appears at the top of a clear uptrend. 2. Candle 2 opens above Candle 1's high (or, in 24-hour markets, above Candle 1's close). 3. Candle 2 closes below the midpoint of Candle 1's body. 4. Candle 2 does NOT fully engulf Candle 1 (that would be a Bearish Engulfing — a stronger pattern).

The deeper Candle 2 closes into Candle 1's body, the stronger the signal. A close at 30% of Candle 1 is much stronger than at 50%.

How to trade the Dark Cloud Cover

Standard entry.

Confirmation entry: Enter short at the close of Candle 2. Stop above Candle 2's high. Target the previous swing low or 1.5x stop distance.

Wait-and-see entry: Some traders wait for an additional bearish candle to confirm before entering. Trades fewer signals but reduces false-positive rate.

Dark Cloud Cover at horizontal resistance with RSI bearish divergence produces tradeable short setups. Standalone in mid-range, the reliability drops significantly. Many traders prefer to wait for Bearish Engulfing (stronger version) or Evening Star (three-candle version) for higher conviction.

More patterns and definitions in the forex glossary, or see them stacked on real charts in the trading blog.

Dark Cloud Cover FAQ