In a choppy market, the Dark cloud cover candlestick pattern has less significance. This shift from buying to selling signals a potential price reversal to the downside. If you are long, you might consider this pattern to exit your position or you can exit on the following candle after taking a confirmation when the price continued dropping. Length of the second bearish candle plays an important role in determining the force with which the reversal will take place. To go short, traders wait for the third candle to continue closing lower. In the following day if the traders plan to exit their extended position, then they might consider going at the end of the bearish candle.


When the shift appears from buying to selling, the price reversal to downside takes place which is most likely to be forthcoming. All efforts have been made to ensure the information provided here is accurate. However, no guarantees are made regarding correctness of data. Please verify with scheme information document before making any investment. The owners of the website and the website hereby waive any liability whatsoever due to the use of the website and/or information. Use of the website, the content and the information is made on the user’s sole liability.

  • Another factor which makes the pattern significant is when it occurs close to a major resistance level.
  • The trader may sell/ create a short position on the stock on the third day, just below the price of the close of P2.
  • In a dark cloud cover pattern, the high point also serves as a resistance line and can be considered as a location for a potential stop-loss.
  • These lies halfway between traditional bar charts and more advanced ‘Renko’ charts.
  • Dark Cloud CoverIf the prices increase, the pattern becomes more significant for the reversal to the downside.

Some of the larger firms within that are Khaitan Electricals, BCL Industries, Oriental Hotels and Ugar Sugar Works. The mid-cap stocks that figure in the list are CDSL and Amber Enterprises. The large-cap stocks under the cloud cover are IT majors TCS and Wipro, Axis Bank, mortgage lender HDFC and Indraprastha Gas. Indeed, the results of the state elections that were declared last week have given some comfort on the hold of the central government. The oil price falling back despite the war in Europe also provides a palliative.

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Traders shall note that no indicator can exactly predict the future stock performance, they only help in predicting potential behaviour. The bearish candlestick notifies the traders about the end of the existing bullish trend. The name ‘dark cloud cover’ is given as a large black candle looks similar to a ‘dark cloud’ over the previous day’s sunny candle. Therefore, novice traders can identify and analyze this pattern, too. Stock traders must be careful not to confuse a dark cloud cover pattern with the bearish engulfing pattern. Although the two candlestick charts patterns are similar in appearance, they translate into two completely different market scenarios.


Readers seeking to engage in trading and/or investing should seek out extensive education on the topic and help of professionals. You will see an uptrend before a dark cloud cover pattern is formed. This means that now you can get to see reversal in the market. Dark Cloud Cover Candlestick PatternYou will see an uptrend before a dark cloud cover pattern is formed. The dark cloud cover candlestick pattern is a bearish reversal signal.

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A dark cloud cover pattern starts with a bullish candle in a bullish uptrend. This is followed by a gap up on the next day which turns into a bearish candle. The close of the bearish candle is below the midpoint of the preceding bullish candle.

MintGenie Explains: Five bearish candle patterns in the stock market Mint – Mint

MintGenie Explains: Five bearish candle patterns in the stock market Mint.

Posted: Tue, 05 Jul 2022 07:00:00 GMT [source]

For example, traders might look for a relative strength index greater than 70, which provides a confirmation that the security is overbought. A trader may also look for a breakdown from a key support level following a Dark Cloud Cover pattern as a signal that a downtrend may be forthcoming. The bearish candle closes below the midpoint of the previous bullish candle.

Dark Cloud Cover Candlestick Pattern –

Else the trader may trail the stop loss and watch if the trailing stop loss was breached or not. As Dark cloud cover is only useful for the traders if it appears during an uptrend or when there is a rise in stock price. As the price increase, there is an occurrence of a potential move to the downtrend where traders can short their long position in this case. If the price movement is unpredictable then the pattern has less effective as the price is likely to remain unpredictable after the pattern is seen. Candlesticks charts are widely used in forex as they are in equity trading.

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Traders could also enter short positions at these junctures as well. Candlestick chart patterns are known to generate false signals when all conditions are not met. A trader must also see to the fact that all preconditions are rightly in place.

If the dark cloud cover candlestick pattern is high when the formation of this candle, there will be more chance of the reversal to take place as shown in the image below. These stocks are under a ‘dark cloud cover’ on the technical charts-Your browser does not support the audio element. This study is another script based on the candlestick pattern . There are a few filters implemented to be applied to the output result to clear out noises. It sounds like finding real Dark Cloud Cover instances are too rare (interesting though!). Dark Cloud Cover it is a bearish reversal candlestick pattern where a down candle opens…

What Is a Dark Cloud Cover? Definition, Significance, and Example – Investopedia

What Is a Dark Cloud Cover? Definition, Significance, and Example.

Posted: Sun, 26 Mar 2017 05:35:48 GMT [source]

You could look at look at selling around 25% of your holding and keep some profit. On the next day, the stock opens higher and then falls to close just a little above the bottom of the green candle. Don’t forget to confirm the signals given by this pattern with other technical indicators. You can also use technical indicators to filter out the stocks for trading the stocks. Dark Cloud CoverIf the prices increase, the pattern becomes more significant for the reversal to the downside. If the price action is odd then the pattern is less significant as the price remains irregular after this pattern.

New buyers face losses, and in order to regain position, they start selling their securities. The position of bears continues to increase, prices fall even more, and when the session ends, the prices close below their initial opening position. As always mentioned, by combining chart patterns with other technical indicatorswave out any false signal if any,generated. Therefore adding any one of the other indicators like volume, Stochastic, RSI, MACD etc. with Candlestick patterns, one can further enhance the probability of the pattern to happen. If traders plan to enter, then they can place their stop loss mainly above the more significant point of the bearish candle.


Here the pattern shows a turnaround from a bullish market to a major bearish market ahead. Booking loss is a very important part of becoming a successful trader. If your setup has failed, the loss should be booked immediately. After that further analysis can be done on why the trade failed. This kind of sharp downward movement after a steady rise in the price over the last few days or weeks – suggests that the stock could reverse and begin moving downwards.

  • This shift from buying to selling signals that a price reversal to the downside could be forthcoming.
  • There is the third candle in this combination which is red and follows these two candlesticks.
  • As seasoned traders, we simplify the trading process for our clients to avoid confusion and losses.
  • This candlestick pattern consists of a large bearish candle forming a “Dark Cloud” over the bullish candlestick .

The in on the website and inside our Trading Room platform is intended for educational purposes and is not to be construed as investment advice. Trading the financial markets carries a high level of risk and may not be suitable for all investors. Before trading, you should carefully consider your investment objectives, experience, and risk appetite. Like any investment, there is a possibility that you could sustain losses of some or all of your investment whilst trading. You should seek independent advice before trading if you have any doubts. Past performance in the markets is not a reliable indicator of future performance.

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