Bearish Dragonfly Doji Candlestick

Bearish dragonfly doji is a trend-reversal candlestick formation which indicates the end of existing uptrend and the start of a downtrend. It is a single candlestick formed of a dragonfly doji candlestick – which as no real-body and no (or very small) upper shadow. Bearish dragonfly doji is rare and has great similarity to bearish hanging man pattern. The difference is, in hanging man formation the candlestick has a small real-body.


Requirements of a bearish dragonfly doji candlestick includes,

• The pattern should be formed at the top of a significant uptrend.
• There should be a dragonfly doji candlestick having (almost) same opening, high and closing prices, and having a long lower shadow and no upper shadow.
• The pattern is more reliable when the dragonfly doji forms a new high.

Bearish dragonfly doji formation occurs when bulls loss control of the existing trend. Market opens with strong sell off by traders to take their profits; and prices decline sharply, below the opening price. But the increased bullish activity at the close of the day helps the market to close at the opening price. This creates a doubt in mind of long traders that the trend is ending and they may be eager to sell off their long positions on next trading day; triggering the start of a new downtrend.

Bearish dragonfly doji is considered as a moderately reliable candlestick formation; it is certainly more reliable than bearish hanging man pattern. Reliability increases with increase in length of lower shadow and prior bullish trend. Most traders wait for confirmation, which can be a bearish candlestick, a lower opening or a lower gap on next trading day.

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