FrogAlgo: A Dragonfly Doji
A Dragonfly Doji is a candlestick pattern characterized by a long wick or shadow that is significantly longer than its body. It is considered a type of doji, where the opening and closing prices are very close together.
The presence of a large wick indicates a wide trading range during the time period of the candle, while the small body represents minimal difference between the opening and closing prices. This pattern occurs when the open, close, and high prices of the candle are close or even identical, but the intraday trading extends far from the opening price before retracing back to close near its initial level or close to the high of the day.
If a Dragonfly Doji appears during an oversold downtrend, it can signal a potential reversal in the prevailing downward price movement. The extended lower wick indicates selling pressure during the candle's duration, but the price sharply reverses and closes near the opening price, suggesting that buyers have entered the market at lower prices and pushed the price back up.
This pattern signifies a significant reversal on the chart during a downtrend, indicating that the subsequent price movement could be upwards. It indicates that lower prices were rejected and absorbed, implying a shift in momentum towards an upward swing.
The Dragonfly Doji is considered a crucial indicator of trend reversal. Its reliability increases when accompanied by high trading volume. When a chart has been in a downtrend, drops to a new price low that is lower than the lows of the previous three trading days, but fails to sustain that low and rallies to close within the upper 10% of the day's trading range, there is a higher probability that the price has bottomed out, and the chart has initiated a new upward movement.
The presence of a large wick indicates a wide trading range during the time period of the candle, while the small body represents minimal difference between the opening and closing prices. This pattern occurs when the open, close, and high prices of the candle are close or even identical, but the intraday trading extends far from the opening price before retracing back to close near its initial level or close to the high of the day.
If a Dragonfly Doji appears during an oversold downtrend, it can signal a potential reversal in the prevailing downward price movement. The extended lower wick indicates selling pressure during the candle's duration, but the price sharply reverses and closes near the opening price, suggesting that buyers have entered the market at lower prices and pushed the price back up.
This pattern signifies a significant reversal on the chart during a downtrend, indicating that the subsequent price movement could be upwards. It indicates that lower prices were rejected and absorbed, implying a shift in momentum towards an upward swing.
The Dragonfly Doji is considered a crucial indicator of trend reversal. Its reliability increases when accompanied by high trading volume. When a chart has been in a downtrend, drops to a new price low that is lower than the lows of the previous three trading days, but fails to sustain that low and rallies to close within the upper 10% of the day's trading range, there is a higher probability that the price has bottomed out, and the chart has initiated a new upward movement.
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