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Saturday, August 9, 2008
A Doji is formed when the open and the close are the same or very close. The Japanese interpretation is that the bulls and the bears are conflicting. The appearance of a Doji should alert the investor of major indecision.
An open and close in the middle of the candlestick signal indecision. Long-legged dojis, when they occur after small candlesticks, indicate a surge in volatility and warn of a potential trend change. 4 Price dojis, where the high and low are equal, are normally only seen on thinly traded stocks.
The Gravestone Doji is formed when the open and the close occur at the low of the day. It is found occasionally at market bottoms, but it's forte is calling market tops. The name, Gravestone Doji, is derived by the formation of the signal looking like a gravestone.
The Long-legged Doji has one or two very long shadows. Long-legged Doji's are often signs of market tops. If the open and the close are in the center of the session's trading range, the signal is referred to as a Rickshaw Man. . The Japanese believe these signals to mean that the trend has "lost it's sense of direction." Doji Star
Bearish Doji Star1st day is a long white day. 2nd day is a doji day that gaps above the 1st day. The doji shadows shouldn't be excessively long
PsychologyThe uptrend is in full force with a strong 1st day. All confidence built up by the bulls from the 1st day is destroyed when the 2nd day's gap up closes near its open. Profit takers will quickly appear if the next day opens lower
Bullish Doji Star1st day is a long black day. 2nd day is a doji day that gaps below the 1st day. The doji shadows shouldn't be excessively long.PsychologyThe downtrend is in full force with a strong 1st day. All confidence built up by the bears from the 1st day is destroyed when the 2nd day's gap down closes near it's open. Short covering will quickly appear if the next day opens higher.
