How to trade Dark Cloud Cover candlestick pattern

Dark Cloud Pattern

We are discussing about the reversal candlesticks patterns. Before digging into, Dark Cloud Cover, you may check Engulfing patterns, Hammer and Hanging man patterns.

Our next reversal pattern is the dark-cloud cover. It is a two candlestick pattern that is a top reversal after an uptrend or, at times, at the top of a congestion band. The first day of this two candlestick pattern is a strong green real body. The second day's price opens above the first session's high.

However, by the end of the second day's session, the market closes near the

low of the day and well within the first day's green body. The greater

the degree of penetration into the green real body the more likely a top

will occur. If red candle penetrates green candle more than 50% that of the green candle, a good indication of a reversal.

If the red candlestick does not close below the halfway point of the green candlestick it may be the best to wait for more bearish confirmation following the dark cloud cover.

 

Dark Cloud Cover

 Points To check in Dark cloud Cover

1. It should be formed in uptrend. (Check the image.)

2. First day it must form a bullish candle.

3. Second day should have a gap up.

4. Second day ends with a bearish candle.

5. Bearish candle must close below 50% of the green candle.

Bearish Engulf

Dark Cloud Cover

Difference Between Dark Cloud Cover and Bearish Engulfing

The dark-cloud cover's red real body covered only part of the prior green real body. The red real body of the bearish engulfing pattern enveloped the entire previous green real body.

Stop Loss

for entering short with the appearance of dark cloud cover, traders can put their SL just above the bearish candle and trail the SL for the continuation.