Profitable Candlestick Charting
Candlestick charting to keep your wealth in an uptrend
Doji Variations
As you learnt from the Doji signal page, this formation basically implies indecision on the part of bulls and bears. There is a state of equilibrium. Supply is absorbed by demand. The Japanese say that when the market/stock is tired as it forms a Doji.
Here are a few variations of the Doji signal.
Gravestone Doji signal
The Gravestone Doji is formed when prices open at a price, move up during the day, but end right back at where they opened. the Japanese compare it to soldiers who went to battle during the day and died and now rest in their graves. If this formation is seen at the top of an uptrend, it will potentially have bearish implications. Think about what the signal means. The bulls had complete control of the stock during the day. However they lost control to the bears, closing the candle right where it had opened. If the following day the bears can close the prices lower, the uptrend will be effectively reversed.
Dragonfly Doji signal
The Dragonfly Doji (named since it looks like a dragon fly) is formed if the prices open at a point, head lower during the day, but end right back at where they opened.If one sees a Dragonfly Doji at the bottom of a downtrend, it could potentially have bullish implications. The bears who had control of the stock during the day lose it to the bulls, thus creating this formation. If the bulls can confirm their strength the next day, the downtrend has a high probability of reversal.
Spinning Top
A Spinning Top is a small body candle. In a trend, when a Spinning Top is noticed after big tall candles, you can infer that the trend is losing strength. It does not necessarily mean that a reversal is about to happen. It only warns you about the strength of the trend.