The **dragonfly doji** is a candlestick pattern often used in technical analysis. Here’s a more detailed explanation:
1. **Formation**: - The open, close, and high prices of the session are nearly the same or very close. - The candlestick has a long lower shadow, indicating that prices fell significantly during the session but recovered strongly by the close. - It has little to no upper shadow, showing minimal upward movement.
2. **Appearance**: - The candlestick resembles a "T" shape.
3. **Location and Context**: - The dragonfly doji typically forms after a **downtrend**, where sellers have been in control. Its appearance suggests a potential shift in market sentiment.
4. **Market Psychology**: - During the session, sellers push prices lower, creating the long lower shadow. However, buyers regain control, driving the price back to the open/high levels. - This recovery suggests buyer strength, hinting at a possible **bullish reversal**.
5. **Interpretation**: - When the dragonfly doji forms in a downtrend or near support levels, it’s often seen as a signal that the downtrend may be losing momentum, and an upward movement could follow. - However, confirmation is needed, such as a strong bullish candle following the dragonfly doji.
6. **Limitations**: - The dragonfly doji alone doesn’t guarantee a reversal. It should be analyzed in combination with other technical indicators or patterns.
### Example in a Chart: - **Downtrend** → Dragonfly Doji forms → Next candle is bullish → Indicates reversal to an uptrend.
By understanding its structure and context, the dragonfly doji becomes a valuable tool for predicting market shifts.
Make sure to buy when it’s touch the entry point. Entry points are the break out stage so please be patient until hits breakout point or place buy order and place. And don’t forget to place stop loss.
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