Dragonfly Doji Candlesticks

Dragonfly Doji Candlesticks

3 min read

Dragonfly doji candlesticks are reversal candlesticks found at the bottom of downtrends. They are shaped like a T and signal a potential reversal to a new uptrend. They have a long shadow and almost no upper body. Enter trade long on the break above the top of the candle. 

Dragonfly doji candlesticks are indecision candlesticks and are not as common as other patterns. However, they are part of the doji family. They look like a T with a long lower shadow and no upper wick. Many times they are black or neutral color on stock charts.

The dragonfly doji candlestick is a more difficult pattern to find. These candlesticks tell a story, whether alone or together with a group.

Dragonfly Doji Candlesticks

Candlesticks have 4 data entries that form them. Dragonfly doji candlesticks form when the opening, high of the day, and closing are all the same, but the day’s low create a long shadow. As a result, they look like a T.

It has a long lower wick but no top wick. This tells that there were a lot of sellers for most of the day. As a result, buyers came in at the end of the day and pushed the price back up. The price returns to the day’s high, forming the T shape. These indecision candlesticks show signs of a reversal.

What It Tells You

Dragonfly doji candlesticks show a reversal. But the implications of said reversal depend on price action and confirmation.

The long wick shows evidence of buying pressure. There is that long tail, though, so sellers are also abundant. They are much harder to find but are reliable reversal signs within a defined trend.

Sometimes the stock price doesn’t show its value because it has fallen so low. The bulls see that and return to buy, increasing the price. It’s all about supply and demand. When the price heads back up to the near-high close, dragonfly tells you, demand is starting to outweigh the supply.

Paired With Technical Analysis

A dragonfly doji candlestick pattern used with technical analysis can be pretty powerful. These candlesticks form around support and resistance depending on the stock trend. These are indecision candles that help confirm reversals.

Reversals usually happen when a stock hits support or resistance and does not break. That’s why you need to know technicals. For example, you can use moving average lines like the simple moving average or VWAP to guide support and resistance.

Real bodies of candlesticks and wicks are also commonly used to find support and resistance. After a downtrend, when they are found at the support, this can signal a bullish reversal.

Comparatively, this can signal a bearish reversal after an uptrend when found at resistance. Again, candlesticks and moving averages are vital to support and resistance.

How to Trade Dragonfly Doji Candlesticks

  • Traders take a long position when the price breaks above the high of the candlestick
  • They use a candlestick close below the low as a stop level.
  • They might take a shot at the break of the low and use a candlestick close above high as a stop
Dragonfly Doji Candlesticks MSFT

15-minute Dragonfly reversal on $MSFT. The stock gained several percent after.

Frequently Asked Questions

A dragonfly doji candlestick is typically is a bullish candlestick reversal pattern found at the bottom of downtrends. They look like a hammer candlestick but have much thinner real bodies. They are also found at support levels signifying a reversal to the bullish upside. 

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