Bearish Gravestone Doji Candlestick
Reliability: Moderate to Weak
After an established bull trend a blue candle forms, closing at the upper trading range near the days high
The second day can be a Doji day (identical open and close). The upper wick of the second day should be fairly long.
The lower wick of the second day should be non-existent or very little.
In a bullish trending market the gravestone illustrates an unsustainable bull rally where price drives up to new highs in trading on day two, but sellers take control by market close.
Although this formation is a moderate to weak in signal strength, it is a warning for longs that the uptrend is losing momentum and bears may retake the market soon.
Most Candlestick analysts will wait to confirm the signal, watching for a red candle for day three. Such confirmation could come in the form of the consistent bearish Evening Star pattern.
The Gravestone Doji pattern is similar to the Doji Star, except its second day is characterized by a gravestone (Doji with a high high and low equal to open and close prices) rather than just a Doji. The Gravestone Doji is less reliable since the rally on day-two suggests bulls may still be in control of the market, despite the recent sell-off. Where the Doji Star offers a stronger signal of uncertainty of possible reversal in trend.
In non-FX markets traders accept a gap between day one and day two (a seen in the equity example above). Since such gaps are unlikely in the 24 hour Forex Market, when this pattern is translated into FX the gravestone could also appear like a shooting Star and still be of the same signal strength.
Regarding strength of signal, the more day-twos candle looks like a Doji the more it reflects sellers taking control of the bull rally, and the stronger the bearish signal.
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