Chartered Market Technician Practice Exam 2025 – Complete Prep Guide

The Dark Cloud Cover pattern is a significant candlestick formation that typically appears at the peak of an uptrend, signifying a potential reversal in market sentiment. This bearish pattern is characterized by a large bullish candlestick followed by a bearish candlestick that opens above the high of the previous candle but closes below the midpoint of the bullish candle.

This formation suggests that buyers are losing control, as the subsequent bearish candlestick indicates that sellers have stepped in, pushing prices down from the prior high. The closing price below the midpoint of the previous candle reinforces the idea that the upward momentum may be weakening, signaling the potential for a trend reversal from bullish to bearish.

Understanding this pattern is crucial for traders as it serves as a warning sign that the market could transition to a downward trend, allowing them to make informed decisions about positions and risk management. The ability of traders to recognize such patterns is fundamental in technical analysis, significantly aiding in anticipating shifts in market direction.