The pattern is detected in technical analysis, discipline used by security traders who look for indicators in historical trading data and endeavor to evaluate assets with the information available to traders. That makes it one of the better technical indicators. Understanding dark cloud cover patterns can reduce significant risk. Traders observe the price to advance lower on the following candle. The dark cloud cover is formed by an up candle that comes after a down candle. The usefulness of the pattern is that it marks a change in the momentum from the upside to the downside.
It is frequently seen when a down candle opens over the close of the preceding up candle and continues to close under the midpoint of the up candle in a candlestick chart. The dark cloud cover is not a weather phenomenon but a candlestick pattern used in technical analysis to locate a bearish reversal signal.
