A dragonfly doji is a bullish doji candlestick that signals a potential reversal upward after a prior downtrend. A dragonfly doji is created when the open and close are the same and there is a long lower shadow and no upper shadow (though a very small upper shadow does not necessarily void the pattern). With the dragonfly doji, the market opens and bears are able to push prices downward like they have previously with the prior downtrend; nevertheless, a price level is reached where bulls are willing and able to push prices back up. When prices are returned to the level that they opened, the dragonfly doji candlestick is complete. Often a dragonfly doji’s lower shadow acts like an area of support for future prices because the lower shadow is in an area where bulls are willing to counteract bears and buy to push prices higher.
The opposite of the dragonfly doji is the gravestone doji.
Dragonfly Doji Candlestick Chart Example
The chart above of the Silver ETF (SLV) shows a dragonfly doji at the bottom of a downtrend and subsequent reversal upward. The long lower shadow gives the price levels at which bulls entered the market and were able to repel the bears and return the price to the opening price for the day. Therefore, the long lower shadow should stand as an area of support for bulls in the future.
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