BEARISH DOJI STAR
Definition
This pattern appears in an uptrend and signals a potential trend reversal. It consists of a white candlestick and a Doji with a gap up at the opening. If the Doji resembles an Umbrella, the pattern is called a "Bearish Dragonfly Doji". If it resembles an Inverted Umbrella, it is called a "Bearish Gravestone Doji". Regardless of the Doji’s shape, these patterns are collectively referred to as "Bearish Doji Star".
Recognition Criteria
1. The market is currently defined by a dominant upward trend.
2. On the first day, a white candlestick is observed.
3. Then, we see a Doji on the second day that gaps up.
Pattern Requirements and Flexibility
The Bearish Doji Star pattern begins with a normal or long white candlestick. It must then continue with a Doji that gaps up.
Trader’s Behavior
The market is in an uptrend, further confirmed by a strong white candlestick. The next day opens higher with a gap up, and trading occurs within a small range. The day closes at the opening price, forming a Doji. While bulls were in control during the uptrend, the appearance of a Doji star now suggests a shift towards equilibrium between bulls and bears. The upward momentum is waning, indicating unfavorable conditions for the continuation of the bull market.
Sell/Stop-Loss Levels
The confirmation level is defined as the midpoint of the gap between the Doji and the previous candlestick. Prices should cross below this level for confirmation.
The stop-loss level is defined as the higher of the last two highs. Following the bearish signal, if prices rise instead of falling and either close above or make two consecutive daily highs above the stop-loss level, without detecting any bullish pattern, the stop-loss is triggered.