Doji reversal patterns

 The Doji is a single candle pattern that can appear in an uptrend or downtrend markets. When the opening and the closing price of a stock is almost same a horizontal line will cross the vertical line that represent the high and lows of the day. This kind of appearance is known as Doji candle pattern. This is one of the most important patterns that cannot be overlooked. The Doji pattern point to indecision in the minds of traders indecision means there is a difference of opinion regarding the trend of the market. The Doji is a very reliable trend reversal indicator. At the top of a trend it signals that the resistance levels have been touched. At the bottom of a downtrend, the Doji pattern signals the formation of support levels.  

There are three main types of Doji patterns that can be easily understood. They are  (1) The Long Legged Doji  (2) The Gravestone Doji (3) Dragonfly Doji 

The Long legged Doji (JUJI) is self explanatory pattern which suggests the day’s activity. The Bulls and the Bears have been very active. The bears trying to drive the price down, but the bulls have managed to drive the price up by intensive buying. 

The Grave stone Doji (TOHBA) indicates, the lack of buying interest in the market and only the sellers were active. The open and close price is at the low of the day’s trading. The absence of bottom shadow the Doji candle appears to be like a grave stone. Hence the name Gravestone Doji. 

A Dragonfly Doji (TONBO) appears where the open and close price is at the high of the day’s trading. The pattern indicates there is buying interest in the trader’s mind. Moreover, virtually no sellers present.  We can observe this pattern forming at the bottom of a trend indicating the turn of the trend well in advance.

Besides these patterns, we do come across two other Doji patterns worth mentioning. They are (4) Morning Doji star and (5) Evening Doji star. The Morning Doji star pattern can form in a downtrend this comprises of a black candle, Doji and a white candle. The third days’ white candle must close within the first day’s black candle. This formation is regarded as a strong reversal point.

The Evening Doji star is likely to appear in an uptrend. This pattern includes a white candle, a Doji and a black candle. The third day’s black candle should close within the body of the first day’s white candle. This pattern is a strong indicator of a trend reversal.

Both Morning and Evening Doji stars are very reliable patterns that can offer trading opportunities.