The Dark Cloud Cover is a bearish reversal candlestick pattern that appears at the top of an uptrend, signalling a potential shift from bullish to bearish momentum. It consists of two candles: the first is a strong bullish (green) candle, followed by a bearish (red) candle that opens above the previous close but closes well into the body of the first candle. This second candle “covers” a significant portion of the previous bullish candle, creating the visual impression of dark clouds overshadowing the prior optimism.

For confirmation, traders usually look for the bearish candle to close at least halfway into the body of the bullish candle. The deeper the penetration, the stronger the potential reversal signal. Volume also adds weight to this pattern—higher trading volume on the second candle often strengthens the bearish indication.

The psychology behind the Dark Cloud Cover is simple: after a strong uptrend, buyers push the price higher at the open, but sellers quickly regain control and drive the price down, showing a shift in sentiment. This pattern is most effective when formed near resistance levels or after an extended rally.

To reduce false signals, traders often combine the Dark Cloud Cover with other technical tools such as moving averages, trendlines, or RSI to confirm a potential trend reversal before entering a short position.