Bullish Dragonfly Doji Candlestick

Bullish dragonfly doji candlestick is a rare candlestick formation indicating trend-reversal; that is the end of existing downtrend and the start of a new uptrend. It is a patter consisting of single candlestick, a dragonfly doji candlestick, having no (very small) real-body and upper shadow. Bullish dragonfly doji pattern has great similarity to Hanging man or Hangman pattern; the difference is that in hanging man there is small real-body.


Requirements of a bullish dragonfly doji candlestick formation include,

• The pattern should be formed at the end/bottom of a noticeable downtrend.
• 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 considered more reliable when the lower wick of dragonfly doji candlestick forms a new low.

Bullish dragonfly doji candlestick formation occurs when bears loss control over the trend. Market opens with strong sell-off to bring the prices to new low. But bulls take control of the market at closing hours and are managed to close the market at or near the opening price (which is also the high of the day). This reduces bearish sentiment and many short-traders want to cover their short positions on next trading day; marking the start of a new uptrend.

Bullish dragonfly doji pattern is a moderately reliable pattern and is considered more reliable than bullish hanging man pattern. Reliability of the formation increases with increase in length of lower shadow. Confirmation of trend-reversal is suggested which can be a bullish candlestick, a above gap opening or a higher close on next trading day.

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