A doji
represents an equilibrium between supply and demand, a tug of war that neither the bulls
nor bears are winning.
In the case of an uptrend, the bulls have by definition won previous battles
because prices have moved higher. Now, the outcome of the latest skirmish is in doubt. After a long
downtrend, the opposite is true. The bears have been
victorious in previous battles, forcing prices
down. Now the bulls have found courage to buy, and the tide may be ready to turn.
For example = INET
Doji Star
A “long-legged” doji
is a far more dramatic candle. It says that prices moved far higher on the
day, but then profit taking kicked in.
Typically, a very large upper shadow is left. A close below the
midpoint of the candle shows a lot of weakness. Here’s an example of a long-legged doji.
For example = K
Long-legged Doji
A “gravestone doji”
as
the name implies, is probably the most ominous candle of all, on that
day, price rallied, but could not stand the altitude they achieved. By the end of the day. They came
back and closed at the same level. Here ’s an example of a gravestone doji:
A “Dragonfly” doji
depicts a day on which prices opened high, sold off, and then returned to the
opening price. Dragonflies are fairly infrequent.
When they do occur, however, they often resolve
bullishly (provided the stock is not already overbought as show by Bollinger bands and indicators such
as stochastic).
