Bearish Dark cloud cover: how to read a failed push higher in an uptrend

The Dark cloud cover is a two-candle bearish reversal pattern that appears after an uptrend. A strong bullish candle is followed by a bearish candle that opens above the first candle's high and then closes below the midpoint of its body. The second candle "covers" much of the first, which suggests that buyers are losing control.

What does a Dark cloud cover look like?

The pattern forms over two consecutive candles:

• First candle: A long bullish (white or green) candle that continues the existing uptrend.
• Second candle: A bearish (black or red) candle that opens at or above the high of the first candle and closes below the midpoint of the first candle's body, but still above the first candle's open.

The deeper the second candle closes into the body of the first, the clearer the pattern. If it closed below the first candle's open, the pattern would no longer be a Dark cloud cover but a bearish Engulfing.

What does the pattern tell you?

The first candle shows that buyers are confident and pushing prices higher. The second candle opens even higher, so at the start of the session it looks like the uptrend is continuing. During the session, sellers take over and drive the price well back into the previous candle's range. A close below the midpoint erases more than half of the prior session's gains.

This shift from a strong open to a weak close shows that higher prices attracted selling instead of more buying, which may signal that the uptrend is running out of strength.

How reliable is the Dark cloud cover?

The Dark cloud cover is a common pattern, and on its own it is a moderate signal. Traders usually look for extra evidence before acting on it:

• Prior trend: The pattern only has meaning after a clear uptrend.
• Depth of the close: A close further below the midpoint of the first candle shows stronger selling.
• Volume: Higher volume on the second candle suggests more sellers took part.
• Confirmation: A lower close on the next candle adds weight to the reversal.
• Context: A pattern that forms near a resistance level or in overbought conditions, for example on the RSI, carries more weight.

How does the Dark cloud cover differ from a bearish Engulfing?

Both patterns start with a bullish candle and end with a bearish one in an uptrend. The difference is how far the second candle falls. In a Dark cloud cover, the bearish candle closes inside the first candle's body, below its midpoint. In a bearish Engulfing, the bearish body covers the entire body of the previous candle. Many traders treat the bearish Engulfing as the stronger of the two. The Dark cloud cover is the bearish counterpart of the Piercing pattern.

What are the limitations of the pattern?

Like any candlestick pattern, the Dark cloud cover describes what has happened, not what will happen. In a strong uptrend, the price often recovers after a single weak session. The pattern also needs an open above the prior high, which is less common in markets that trade around the clock, such as crypto and forex. Traders often place a stop-loss above the high of the second candle to limit losses if the reversal fails.

How to find the Dark cloud cover on TradingView

TradingView can detect this pattern for you on any chart:

• Built-in indicator: Open Indicators and search for Dark cloud cover (bearish). The indicator marks each occurrence on the chart.
• All candlestick patterns at once: Add the All candlestick patterns indicator to see every supported pattern on one chart and choose which ones to display in its settings.
• Trend filter: In the indicator settings, choose how the prior trend is detected (based on SMA 50, or SMA 50 and SMA 200), or turn trend detection off.
• Alerts: Create an alert on the indicator to get notified when a new pattern forms.

Understanding the Dark cloud cover

The Dark cloud cover is a two-candle pattern made up of a long bullish candle and a bearish candle that opens above it and closes below the midpoint of its body. It signals a possible reversal from an uptrend to a downtrend. The pattern is fairly common, so traders usually confirm it with volume, the next candle, and other indicators before acting on it.