Gravestone Doji
Tue, Apr 15The Gravestone Doji is a type of Japanese candlestick where the opening and closing prices are at the same level or very close to it. This Doji candle opens and closes near its low, resulting in a long upper shadow and no body.
When it features a long upper shadow, it indicates a bearish reversal. If it appears at the peak of an uptrend, it is interpreted as a reversal signal. This pattern is considered more bearish than a shooting star.
To recognize a Gravestone Doji, look for the following characteristics: it has a long upper shadow without a lower shadow and resembles an upside-down capital letter. To help remember, think of how a real gravestone is anchored to the ground; the horizontal line of the Gravestone pattern is fixed at the bottom. This contrasts with the Dragonfly Doji, where the horizontal line is at the top.
A Gravestone Doji is a bearish indicator. It signifies that the price opened at the session's low, experienced a significant rally during the session, and then closed at the session's low. Consequently, the open, low, and close prices are all the same or very similar.
This candlestick pattern is particularly important when it appears after an uptrend, following bullish candlesticks, suggesting that the uptrend may be nearing its end. Dojis are known as trend reversal indicators, especially when they occur after an uptrend or downtrend. While a basic Doji indicates indecision, a Gravestone Doji suggests that the market has opted for a bearish direction.
When you observe a Gravestone Doji candlestick following a strong uptrend, it is likely that a trend reversal is imminent. Once you identify a Gravestone Doji, a straightforward strategy is to initiate a short position below the low of the Doji.
Your trade should only be activated if the low of the Doji is breached. If the low of the Gravestone Doji holds, the price may continue its upward trend.
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