What are Dragonfly Doji Candlesticks?
It is a reversal candlestick pattern with long lower shadow and with out a real body and upper shadow. It is a simple candlestick pattern made of a single candleline. They are bullish in nature. It is so called because of its resemblance to the dragonfly.
They can occur any where on the chart. Buy they have more relevance when they form at the end of a down trend at the support level.
It may be a part of a complex candlestick pattern.
The market is in a down trend and at a support level. The stock opens and moves in the direction of the trend. After falling for some time, the perception of the market changes. So the prices starts moving up. At the end of the session the price moves towards the opening price and closes at it.
This results in the absence of the real body with only lower shadow and with out an upper shadow. Market opens and closes at the high of the day. Only lower shadow is present below a small horizontal line.
This candlestick exhibits a subtle changes of an impending change in the trend. When the market opens in a down trend, there was increased supply than the demand. So the price falls. But over sometime the demand increases and equals the supply. So the price makes a low for the day.
The change in the trend which is still invisible on the chart, increases the demand more than the supply. The price moves up and closes at the opening. At the end of the session the demand is equal to the initial supply. Both opening and closing are at the high of the day.
At this stage we cannot enter the market and start buying. We want to make sure that the trend has changed and continuing. So we should wait to see the next day's price movement. If next day is an up day or a white candlestick, buy above the high of the second day change of trend confirmation candlestick. Do not forget to protect your capital by placing a stop loss sell order below the low of the down swing.
If you are looking for an early entry, on the next day after the dragon fly doji day, watch if the market opens above the high of the doji. If it does buy immediately. Or if the open is below or at the high of the doji day, then buy just above the high as the price crosses above the high. Stop loss is below the swing low.
The market can open and close at the low of the day. The resultant formation is a Gravestone Doji.
Click the link below to read and learn about them.
There are many more simple candlestick patterns used in stock analysis. Some of them are listed below. You may click on the name of each pattern listed below to learn and understand more about them.
White Candles are bullish lines in candlestick and candlevolume charts. They signify that the closing price is higher than opening price for that time period.
Black Candles or black candlesticks are bearish lines in candlestick and candlevolume charts. They signify that the closing price is lower than opening price for that time period.
Long lower shadow of a candlestick indicates that the bears are loosing power and bulls are gaining power in that time period.
Long upper shadow of a candlestick indicates that the bulls are loosing power and bears are gaining power in that time period.
A Candlestick Hammer is a reversal candlestick pattern with long lower shadow and no upper wick. They are bullish in nature.
A Hanging Man candlestick is a reversal candlestick pattern with long lower shadow and no upper wick. They are bearish in nature.
Spinning Top candlestick is a candlestick pattern with small real body. They represent the areas of uncertainty.
Doji candlestick is a candlestick pattern with out a real body. They represent the areas of uncertainty.
Dragonfly Doji candlestick is a candlestick pattern with out a real body and upper shadow. They represent the areas of uncertainty.
Gravestone Doji candlestick is a candlestick pattern with out a real body and lower shadow. They represent the areas of uncertainty.
Marubozu White candlestick is a white candlestick with out shadows. They represent strong bullish trend in the market.
Marubozu Black candlestick is a black candlestick with out shadows. They represent strong bearish trend in the market.
These are hybrid created by combining the features of Equivolume charts and Candlestick charts. The effect of high volume is pictorially emphasized.
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