Bullish Doji Star Candlestick Pattern
The bullish doji star candlestick pattern is a rare formation that investors watch for because of its strong indication of a reversal. This star occurs during a strong downtrend. On the first day of the pattern, the bearish market continues with a long black candlestick. On the second day, however, there is a doji, a day that opens and closes at or near the same point. This day generally looks a lot like an addition sign due to the relatively equal length of the two wicks. This doji usually begins after a gap down, but obviously it has failed to fall any further. The doji’s wicks tend to be short.
This is significant because it indicates that the downward market is losing strength. The bears were unable to sustain their trend, as evidenced by the lack of further downward movement. The lack of wicks suggests that the sellers and buyers are currently evenly matched. There will likely be a reversal in the near future. This day of indecision usually serves as an indicator that the market has reached its threshold and simply cannot move any further downward.
Your Next Move
The bullish doji star formation is both extremely rare and extremely reliable. In fact, many candlestick pattern experts consider it the strongest reversal signal seen in a two day pattern. However, many traders nonetheless wait to see what the third day holds. Any moves made on the second day of this pattern should be preparing for a bullish reversal, because it is highly likely. A lot of profit can be made at this point.
Confirmation
Confirmation of the bullish doji star would consist of any upward movement, whether it be a gap up, an even higher close, or any type of white candlestick. If there is a gap up the next day followed by a tall white candlestick that reaches above the opening of this formation’s first black day, the formation is a bullish morning doji star, which is a very strong confirmation. If the gap up the next day is so high that the wicks of the second and third day don’t overlap, this is the bullish abandoned baby formation, which is even stronger.
Variations
As mentioned above, the bullish doji star may be the first two days of the bullish morning doji star or bullish abandoned baby candlestick pattern if the third day has a white candlestick that penetrates into the first day’s black candle. If either of these occurs, it is time to act immediately while the profit potential is immense.
Similar Patterns
The bullish doji star is similar to the bullish inverted hammer, except that it has no white body on the second day. Also, it may have a bottom wick, while the inverted hammer does not.
A wise trader knows to watch for this pattern because of its high reliability. While the bullish doji star is rare, it is rarely a fluke. When you see this two day formation or one of the three day patterns associated with it, acting immediately can be enormously profitable.
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