Dark Cloud Cover is a bearish reversal candlestick pattern where a down candle (typically black or red) opens above the close of the prior up candle (typically white or green), and then closes below the midpoint of the up candle. The dark cloud cover pattern is more reliable when the second candle is a doji.The candlesticks forming this pattern can be referred to as:
Down candle with long lower shadow, or
Up candle with long upper shadow
The long lower shadow of the first candle indicates that there was strong selling pressure during the session. The long upper shadow of the second candle indicates that there was strong buying pressure during the session.The dark cloud cover pattern is a reversal signal. It indicates that the bulls might be losing strength, and it could be a precursor to an extended downtrend. The pattern can also signal trend exhaustion, which means that the current trend may run out of steam and reverse direction.The formation suggests that bulls were unable to hold onto their previous gains, and that bears are now in control. Dark Cloud Cover is often seen as a sign of trend reversal, and may be used to signal entry into short positions.
