Japanese candlesticks - Dark cloud cover
Dark cloud cover
Definition: A dark cloud cover structure is comprised of two Japanese candlesticks. The first candlestick is a long bullish one (green) followed by a second large bearish candlestick (red). The opening of the second candlestick occurs in a bullish gap and the closure is below the mid-point of the first candlestick’s body. This is the inverse of a bullish piercing.
Characteristic: A dark cloud cover often forms after a significant increase characterized by several large green Japanese candlesticks.
Significance: A dark cloud cover is a reversal pattern, it indicates a downward trend reversal. It reflects sellers’ desire to defend a price level.
Note: If the dark cloud cover occurs on a high resistance level, it reinforces the pattern’s relevance.
Invalidation: If the next candlestick is not bearish or does not open on a bearish gap, the dark cloud cover structure is invalidated.