Dark Cloud Cover
A two-candle reversal pattern that forms after a rise, when a red candle closes below the middle of the previous large green candle's body. It can show that more than half of the green candle's gain has been given back and that sellers are starting to gain ground.
How it forms
- It follows a clear rise. Since it is a reversal signal, there needs to be a move to reverse.
- Candle 1 is green with a clear body: large compared with the candles around it, covering roughly more than half of its range.
- Candle 2 is red and opens at or above candle 1's close.
- Candle 2 closes below the midpoint of candle 1's body but above candle 1's open. If it closes below the open too, the pattern becomes a bearish engulfing.
In the classic definition, candle 2 opens above candle 1's high, with a gap. Crypto trades around the clock, so candle 2 usually opens at candle 1's close. The opening condition is then read as "at or above the close", and the weight shifts to the close: how deep candle 2 reaches into body 1 is what decides it. An upper wick on candle 2 that clears candle 1's high partly replaces the "push higher, then rejection" story the gap tells.
What it suggests
The first candle shows buyers in control with a strong candle. The second starts higher or at the same level, but over the same length of time gives back more than half of the first candle's gain. This is read as a cloud of selling settling over the rise, with the balance possibly starting to shift in favour of sellers.
A dark cloud cover is considered a step weaker than a bearish engulfing: sellers have taken back only part of the first candle, not all of it. On its own, the pattern does not prove the rise is over. The next candle closing below candle 2's close is considered a confirmation that supports this reading.
When it strengthens, when it weakens
Strengthens
- Forming at a resistance zone
- A clear rise before the pattern
- Candle 2 closing deep into body 1, close to its open
- Candle 2's upper wick clearing candle 1's high
- High volume on candle 2
- Forming on a higher timeframe (4H, 1D)
Weakens
- Forming in a flat, directionless market
- Candle 2 closing only just below the midpoint
- Candle 1 being small
- A strong support zone just below
- Forming on very low timeframes (1m, 5m)
The MarketLevelMap view
How it relates to zones
A dark cloud cover means most at a resistance zone. Candle 1 carries price into the zone; candle 2 stays inside or just below it and cuts deep into body 1. This can be read as the attempt to clear the zone being rejected. When candle 2's wick reaches into the zone and its body closes below it, the reading is clearer.
Candle 1's open is the first concrete reference. The lower part of body 1 often lines up with a small support zone where the rise began. If later candles close below that level, the pattern has in effect turned into a picture as strong as a bearish engulfing.
The first support zone below the pattern matters too. If support is very close, there is little room for a decline and the pattern is considered weaker.
When it is invalidated
If price closes above the pattern's highest point (including both candles' wicks), the bearish scenario is considered invalid. If the pattern formed at a resistance zone, a close above the zone means the same.
Later candles closing back above the midpoint of candle 1's body also clearly weaken the pattern.
Often confused with
- Bearish EngulfingIts stronger relative: the red candle covers the whole green body and closes below its open too.
- Piercing LineThe opposite: after a decline, a green candle closes above the middle of the red body.
- Bearish HaramiA small red body sits inside the green body: it opens below candle 1's close and usually does not reach the midpoint.
For general information only. Not investment advice.Last updated: