UK Accounting Glossary
The Bullish Doji Star is a candlestick pattern that forms during a downward trend. This is what happens in the pattern: following a stretch of bearish trades, a long bearish candlestick occurs; the subsequent candlestick is characterized by a gap opening below the previous close and is a Doji, Spinning Top or other such short candlestick.
The appearance of a Bullish Doji Star candlestick pattern in a strong downtrend indicates that sellers are losing control and market is deadlocked between buyers and sellers. The deadlock seen in the Bullish Doji Star may be as a result of diminishing selling pressure or an increase in the buying force. Whatever the reason is, the Bullish Doji Star tells us that the strength of downtrend is now dissipating and the market may reverse course.
Traders should wait for a confirmation on the third day before entering a trade in the reverse direction. This confirmation may be a long bullish candlestick, a large gap up or a higher close on the next trading day.
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This glossary post was last updated: 23rd March 2020.