What it looks like
Two candles after a rise. First, a solid up candle. Second, a down candle that opens at or above the first close and closes below the midpoint of the first body, but not below its open (that would be engulfing).
What it means
Buyers ended the first candle in charge, then sellers took back more than half of it in the next. Buyers had been in control and this is where they were stopped. It is a sign the rise is tiring, not proof that it has turned.
How to trade it
- 1
Confirm: wait for the next candle to close below the pattern's low.
- 2
Enter: sell on that close.
- 3
Stop: just above the pattern's high.
- 4
Target: 2 times the stop, or the nearest swing low.
- 5
Example: on US30 15 minute a dark cloud cover forms at a round number with a 50 point range. The next candle closes below its low; you sell with a 55 point stop and aim 110 points lower.
A close above the pattern's high.
Where it works best
At a ceiling after a rise, such as a prior swing high, the previous day's high or a pivot.
WickSpeak finds the dark cloud cover automatically on any chart and names it on the candles that made it. Next to the name it writes what the pattern is, how to trade it and what proves it wrong, so you never have to guess the rule. In Playbook you can use the dark cloud cover, or any of the 146 patterns, as a condition alongside up to 12 conditions on any of 12 timeframes, then backtest it on past candles with your costs.
Common mistakes
- Accepting a close above the middle of the first body.
- Selling before the confirming close.
- Fighting a strong trend with no ceiling nearby.
Related patterns
Questions traders ask
Is dark cloud cover bearish?
Yes, it is a bearish two candle signal after a rise. It needs a close below the pattern's low to trade.
How is it different from a bearish engulfing?
Dark cloud cover closes below the middle of the prior up body but above its open. A bearish engulfing closes below that open.
How far must the second candle close?
Below the midpoint of the first candle's body. The deeper it closes, the clearer the message.
What proves dark cloud cover wrong?
A close above the pattern's high.