InvestorQ : What is the dragonfly DOJI and is it the same as the simple DOJI pattern in technical analysis?
Bhavik Nehru made post

What is the dragonfly DOJI and is it the same as the simple DOJI pattern in technical analysis?

Niraj Mehta answered.
2 years ago

No, the dragonfly DOJI is different from the traditional simple DOJI and also has a different kind of an interpretative value. The dragonfly DOJI, when appearing after a prolonged downtrend, signals a possible upcoming reversal to the upside. Examination of the price action indicated by the dragonfly DOJI explains its logical interpretation. The dragonfly shows sellers pushing price substantially lower (the long lower tail), but at the end of the period, price recovers to close at its highest point. The candlestick essentially indicates a rejection of the extended push to the downside. The dragonfly DOJI is very useful at an index level especially when the markets are coming out of a situation when the last buyer is being squeezed out or when the last seller in the stock or the market is being squeezed out. In terms of confirmation, the reversal of direction in case of a dragonfly DOII is not only more reliable and actionable but the price movement in the opposite direction is rapid and also very sharp. A dragonfly DOJI is essentially a bullish signal and hints that the last seller in the market is being squeezed and the lull is indicative of an uptrend.

When on the topic of dragonfly DOJI, it would be instructive to look at another specific pattern of DOJI which is called the Gravestone DOJI. The gravestone DOJI name clearly hints that it represents bad news for buyers. The opposite of the dragonfly formation is the gravestone DOJI. This gravestone DOJI indicates a strong rejection of an attempt to push market prices higher, and thereby suggests a potential downside reversal may follow. In fact, the dragonfly DOJI occurs when the last possible buyer in the market has been squeezed out and the market is ripe for a total trend reversal.