Definition:
An Umbrella is a type of a doji characterized with
no upper shadow but a long lower shadow. The long lower
shadow shows the evidence for buying pressure, but the
position of low price indicates that plenty of sellers
still are around. Umbrella is interpreted as a reversal
pattern.
Recognition Criteria:
1. The real body is either a horizontal line or it
is significantly small (its length is not more than
few ticks).
2. There is no upper shadow.
3. However the lower shadow is long.
Explanation:
Umbrella indicates that sellers mostly dominated trading
during the day and they were able to drive the prices
lower during the day. However; buyers resurfaced at
the end of the day and they successfully pushed prices
back to the opening level and to the day high.
Important Factors:
Umbrella has the potential to signal a bullish reversal
at the bottom if it appears after a long downtrend,
long black candlestick or if it is seen at a visible
support level. Likewise; umbrella may signal a bearish
reversal at the top if it appears after a long uptrend,
a long white candlestick or if it is seen at a visible
resistance level. Bearish or bullish confirmation is
required in both situations.
