UK Accounting Glossary
Dark cloud cover is a candlestick charting pattern that can signal the top of an uptrend — it is a bearish reversal pattern. A long white candle the first day followed the second day by a long black candle that opens above the white candle’s closing price and closes within the body of the white candle characterizes the dark cloud cover pattern. Most traders believe that the deeper the black candle in the dark cloud cover pattern penetrates the white candle’s body, the more likely a security has reached a top. Some technicians prefer a dark cloud cover pattern to exhibit black candle penetration into the bottom half of the white candle. Confirmation of the dark cloud cover pattern comes on subsequent days of downward trading. The dark cloud cover pattern is related to the bearish engulfing pattern except that the black candle of the dark cloud cover pattern doesn’t engulf the white candle. The bullish counterpart of the dark cloud cover is the piercing pattern.
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This glossary post was last updated: 7th February 2020.