Dark Cloud Cover Candlestick Pattern: A Bearish Reversal Indicator

Candlestick patterns are a popular tool used by traders to spot trends in the market. One of the most popular bearish reversal patterns is the Dark Cloud Cover candlestick pattern.

What is the Dark Cloud Cover Candlestick Pattern?

The Dark Cloud Cover candlestick pattern occurs when an upward trend is about to end. Traders use it to get out of a bull market and keep their profits. Once they're sure that the pattern is legit, they close out some or all of their positions and might even start a short-sell position.

How to Identify the Dark Cloud Cover Candlestick Pattern?

The Dark Cloud Cover candlestick pattern involves not one, but two candlesticks. First, you'll see a big, old green candle. Then, you'll see a red candle that has gapped higher on the open and is just kind of opposing that first one. Since in the crypto world, the market is open 24/7, it's tough to spot gaps. So, to make this work with crypto, the bearish red candle must retrace at least half of the green candle.

Confirmation Signals for the Dark Cloud Cover Candlestick Pattern

Traders usually chill and wait for the confirmation signals, like the RSI being greater than 70 (which means the market is overbought), to show up before they hit the sell button after the Dark Cloud Cover candlestick.

How to Use the Dark Cloud Cover Candlestick Pattern in Your Trading Strategy?

When you see the Dark Cloud Cover pattern, you want to draw a support trend line that's going up. After that, when the price goes below that line, it's your cue to enter a short position. You want to place your stop loss just above the high of the red candle. And for your take profit, you gotta use other types of candles or analysis cause Dark Cloud Covers don't provide you that.

The Difference Between the Dark Cloud Cover and the Bearish Engulfing Candlestick

It's important not to mix up the Dark Cloud Cover with the Bearish Engulfing Candlestick. In the Dark Cloud Cover, the second candle only needs to cover half of the first candle, whereas in the Bearish Engulfing, it's gotta completely engulf that first candle.

Conclusion

Keep an eye out for the Dark Cloud Cover candlestick pattern, and make sure to use it as part of your trading strategy. With a little practice, you'll be able to spot this pattern and use it to your advantage in the market.

Watch this video to better understand the concept:

@bittok_crypto_tips Name 5 More Candlestick Patterns 📊 . To Practice these tips, sign-up on BingX with Code: BitTokTips and use VST 👌🏼 . #cryptotrading #chartpattern #trading #forex #forextrading ♬ original sound - BitTok Crypto Tips

 

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