UK Accounting Glossary
The Bearish Doji Star is a double candlestick formation that is viewed by technical analysts as a bearish reversal pattern.
The Bearish Doji Star is a candlestick pattern that forms during an upward trend. This is what happens in the pattern: following a stretch of bullish trades, a long bullish candlestick occurs; the subsequent candlestick is characterized by a gap opening above the previous close and is a Doji, Spinning Top or other such short candlestick.
The appearance of a Bearish Doji Star candlestick pattern in a strong uptrend indicates that buyers are losing control and the market is deadlocked between buyers and sellers. The deadlock seen in the Bearish Doji Star may be as a result of diminishing buying pressure or an increase in the selling force. Whatever the reason is, the Bearish Doji Star tells us that the strength of uptrend is now dissipating and the market is vulnerable to a setback.
Traders should wait for a confirmation on the third day before entering a trade in the reverse direction. This confirmation may be a long bearish candlestick or a large gap down.
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This glossary post was last updated: 22nd March 2020.