Gravestone doji is a pattern on stock exchange that suggests beginning of a downtrend. It is a reverse candlestick pattern, which means that open, low and closing prices are very similar. In the same time the upper shadow is quite long. That suggests that bulls were more active in the beginning of the session, but then they were overcame by bears.
Typical market decisions related to gravestone doji are:
- exiting the long positions (limit the losses)
- initiating short positions (playing on losses)
However, sometimes the gravestone doji is not enough to make a decision. It should be backed with other patterns and volume during the session. Usually gravestone doji shows end of uptrend. Therefore, if it is spotted during the downtrend it can have no consequences.
- Lu, T. H. (2014). The profitability of candlestick charting in the Taiwan stock market. Pacific-Basin Finance Journal, 26, 65-78.
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