Dark Cloud Cover Candlestick Pattern: What It Looks Like and What It Means
Dark cloud cover is a two-candle pattern: a strong up candle, then a down candle that opens higher but closes below the midpoint of the first candle's body. After a rise, that second close is read as a possible bearish reversal (the word points toward lower prices), a hint that buyers are losing the lead. What it records is two periods of trading, so the third is still open.
How It Forms
It starts with a period when buyers are in charge: the price opens low and closes near the top, so the candle is tall. The next period opens even higher, above the previous close, which looks like more of the same. Then sellers take over and push the price below the middle of the first body.
One candle covers one period of trading. Its body is the filled part between the open and the close, and the wicks are the thin lines that run on to the period's high and low. An up candle finishes above its open; a down candle finishes below.
Here are the drawing's five candles, with made-up prices in dollars:
| Candle | Open | High | Low | Close |
|---|---|---|---|---|
| 1 | $11 | $15 | $9 | $13 |
| 2 | $13 | $19 | $11 | $17 |
| 3 (strong up) | $18 | $35 | $17 | $34 |
| 4 (down) | $37 | $39 | $22 | $24 |
| 5 | $24 | $26 | $17 | $19 |
Candle 3's body runs from $18 to $34, so its midpoint is $26 (add the two prices and halve the total). Candle 4 opens at $37, above that $34 close, then closes at $24, which is $2 under the midpoint. Sellers erased $10 of the $16 gain without covering the whole body, which starts at $18. This example is a modest one: it clears the midpoint by only $2, so a reader would want the next candle to confirm it.
How to Read It
- The midpoint test. The second candle must close back below the middle of the first candle's body. That close is what shows sellers erased more than half of the gain.
- The depth. The farther the close reaches into the first body, the stronger the reading.
- The setting. It is a bearish cue after an uptrend. Where the rise happened matters too, and support and resistance levels show where earlier moves have paused.
What to Watch For
How deep the close goes changes the reading. A close that only just slips under the midpoint is a modest signal that wants more evidence, and a close well into the body is read as stronger. One that covers the entire first body makes the pattern a bearish engulfing instead.
Three patterns are easy to confuse with it:
- A piercing line is the mirror image: a down candle, then an up candle closing above the first one's midpoint. It is bullish (pointing toward higher prices) and follows a decline, so it differs in direction and position.
- An engulfing pattern differs by shape: the second body covers the whole first body.
- An evening star also differs by shape: it has three candles, with a small pause candle in the middle.
Free or Premium
Dark cloud cover sits among the 13 core patterns. Charts show it for free, and so does Rapunzl's Stock Scanner.
Try It in Rapunzl
On a Candlestick or OHLC chart, open Customize Chart → Chart Indicators → Levels, Patterns & AI Charts and turn on Pattern Markers. Dark cloud cover is a bearish pattern, so it is marked ▼, and the patterns found are listed below the chart.
The Bearish candlestick filter in the Stock Scanner lets you pick Dark Cloud Cover; the results are stocks where a bearish pattern finished on the latest daily bar. Open a result to reach that stock's chart, turn on Pattern Markers there, and check whether the first candle was a strong rise.
A 15-Minute Class Activity
The Midpoint Check. Students work in pairs with graph paper and pencils. A first candle opens at $60 and closes at $80 (made up). Three possible second candles follow, also made up.
| Second candle (made-up prices) | Open | Close |
|---|---|---|
| X | $84 | $66 |
| Y | $83 | $74 |
| Z | $85 | $58 |
- 3 minutes. Draw the first candle to scale. Find its midpoint by adding $60 and $80, then halving. ($70.)
- 5 minutes. Test X, Y and Z: does each open higher, and does each close below the midpoint without covering the whole first body? (X qualifies. Y closes above $70, so it is too shallow. Z closes under $60, so it covers the body and is a bearish engulfing.)
- 2 minutes. For each second candle, find how far its close fell below the first candle's $80 close. ($14, $6 and $22. Z fell by more than the whole $20 body, which is why it covers it.)
- 2 minutes. Each partner explains aloud why Z is not a dark cloud cover.
- 3 minutes. Exit ticket: in one sentence, say what a close above the midpoint tells you about the gain.
Related Patterns
- Piercing Line: the bullish mirror image, after a decline.
- Engulfing: the second body covers the first completely.
- Evening Star: a three-candle topping pattern.
- How to Read a Candlestick Chart: how the open and close set a candle's body.
Frequently Asked
Questions
Add the open and the close, then divide by two. For a made-up body from $10 to $30, the midpoint is $20.
Yes. The down candle opens above the up candle's close, then falls back below the midpoint of the up candle's body.
Then it is a bearish engulfing pattern instead, not dark cloud cover.
Yes. A piercing line starts with a down candle and ends with an up candle closing above the midpoint, so it is the bullish mirror image.
Make Chart Reading Concrete for Students
Want to see how Rapunzl's charts and simulator fit into your lessons? Request a demo. Parents can find the family version on our parents page.
Indicators, patterns and examples in this article are for education and are not investment advice or a recommendation to buy or sell any security.
By Maria Rodriguez, Curriculum Designer at Rapunzl.