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To see the performance of the pattern in your stock exchange in the context of other stock markets please examine the table below. Find your stock market there and see how it ranks among the others. This will give you an idea about the pattern’s strength and reliability and help you in your buying decisions.
BULLISH MORNING DOJI STAR
Definition
This is a three candlestick pattern signaling a major bottom reversal. It is composed of a black candlestick followed by a Doji, which characteristically gaps down to form a Doji Star. Then, we have a third white candlestick whose closing is well into the first session’s black real body. This is a distinctive bottom pattern.
Recognition Criteria
1. The market is characterized by a prevailing downtrend.
2. We see a black candlestick on the first day.
3. Then, we see a Doji on the second day that gaps in the direction of the downtrend.
4. A white candlestick is observed on the third day.
Pattern Requirements and Flexibility
The Bullish Morning Doji Star starts with a black candlestick and it should continue with a doji that causes a gap opening lower than the close of the first day. The third day of the pattern is a white candlestick, which has the same or higher opening price with the Doji, and it should close well into the black candlestick that appears at the beginning of the pattern. The extent of how high this candlestick must close is defined according to the other candlesticks belonging to the pattern. The third day’s closing must reach the midpoint between the first day’s opening and the second day’s lowest body level.
Trader’s Behavior
A downtrend is already established, and the black candlestick confirms the continuation of the downtrend. The appearance of the Doji that causes a gap indicates that bears are still pushing down the price. However, this tight price action between the open and the close shows indecision as well. On the third day, the body of the candlestick is above the previous day, trying to cover some of the ground from the down day. A significant trend reversal has occurred.
Buy/Stop Loss Levels
The confirmation level is defined as the last close. Prices should cross above this level for confirmation.
The stop loss level is defined as the lower of the last two lows. Following the BUY, if prices go down instead of going up, and close or make two consecutive daily lows below the stop loss level, while no bearish pattern is detected, then the stop loss is triggered.