The DOJI is a reversal signal. The opening and closing prices
are at the same price. The lack of a real body means the bulls and the
bears are fighting and the balance of power may be shifting. The doji is
a warning sign of a pending reversal. Preceed with caution. The doji
needs a confirmation candlestick before you act on it, and when found
with in other candle patterns the doji candle adds strength and
reliability to the formation. If there is a doji in an up trend , we
need a close
below the close of the doji as confirmation that the trend has changed.
below the close of the doji as confirmation that the trend has changed.
There are four special types of Doji lines. The length of the
upper and lower shadows can vary and the resulting candlestick looks
like a cross, inverted cross or plus sign. The word "Doji" refers to
both the singular and plural form.
Long-Legged Doji, Dragonfly Doji, Gravestone Doji and Four Price Doji
SPINNING TOP
The spinning top can be a very good reversal signal and can be
any colour. The smaller the real body, the less the direction the market
was. The pattern indicates the indecision between the buyers and
sellers.
MARUBOZU
Marubozu means there are no shadows from the bodies. Depending
on whether the candlestick’s body is filled or hollow, the high and low
are the same as it’s open or close. If you look at the picture below,
there are two types of Marubozus: White Maubozu and Black Marubozu.
A White Marubozu contains a long white body with no shadows. The
open price equals the low price and the close price equals the high
price. This is a very bullish candle as it shows that buyers were in
control the whole entire session. It usually becomes the first part of a
bullish continuation or a bullish reversal pattern.
A Black Marubozu contains a long black body with no shadows. The
open equals the high and the close equals the low. This is a very
bearish candle as it shows that sellers controlled the price action the
whole entire session. It usually implies bearish continuation or bearish
reversal.
White Marubozu and Black Marubozu
HAMMER AND HANGING MAN
The hammer and hanging man look exactly alike but have totally
different meaning depending on past price action. Both have cute little
bodies (black or white), long lower shadows and short or absent upper
shadows.
The hammer is a bullish reversal pattern that forms during a
downtrend. It is named because the market is hammering out a bottom.
When price is falling, hammers signal that the bottom is near
and price will start rising again. The long lower shadow indicates that
sellers pushed prices lower, but buyers were able to overcome this
selling pressure and closed near the open.
Word to the wise… just because you see a hammer form in a
downtrend doesn’t mean you automatically place a buy order! More bullish
confirmation is needed before it’s safe to pull the trigger. A good
confirmation example would be to wait for a white candlestick to close
above the open of the candlestick on the left side of the hammer.
The hanging man is a bearish reversal pattern that can also mark
a top or strong resistance level. When price is rising, the formation
of a hanging man indicates that sellers are beginning to outnumber
buyers. The long lower shadow shows that sellers pushed prices lower
during the session. Buyers were able to push the price back up some but
only near the open. This should set off alarms since this tells us that
there are no buyers left to provide the necessary momentum to keep
raising the price.
Hammer and Hanging Man
Hammer and Hanging Man
INVERTED HAMMER AND SHOOTING STAR
The inverted hammer and shooting star also look identical. The
only difference between them is whether you’re in a downtrend or
uptrend. Both candlesticks have petite little bodies (filled or hollow),
long upper shadows and small or absent lower shadows.
The inverted hammer occurs when price has been falling suggests
the possibility of a reversal. Its long upper shadow shows that buyers
tried to bid the price higher. However, sellers saw what the buyers were
doing, said “oh hell no” and attempted to push the price back down.
Fortunately, the buyers had eaten enough of their Wheaties for breakfast
and still managed to close the session near the open. Since the sellers
weren’t able to close the price any lower, this is a good indication
that everybody who wants to sell has already sold. And if there’s no
more sellers, who is left? Buyers.
The shooting star is a bearish reversal pattern that looks
identical to the inverted hammer but occurs when price has been rising.
Its shape indicates that the price opened at its low, rallied, but
pulled back to the bottom. This means that buyers attempted to push the
price up, but sellers came in and overpowered them. A definite bearish
sign since there are no more buyers left because they’ve all been
murdered.
Inverted Hammer and Shooting Star
Inverted Hammer and Shooting Star
