BQLearning: What Are Doji, Morning Star Doji And Hammer Candlesticks?
BQ Learning is a special show that seeks to demystify financial markets, economic theories, legal processes and political structures.
In this series, we explain how technical analysis works; how to identify trading opportunities through it and decode various concepts associated with it.
A Doji candlestick indicates indecision between buyers and sellers in the stock market and it may signal a price reversal or trend continuation.
A Doji is formed when a stock’s open and close are virtually equal. The length of the upper and lower shadows—the high and low of the day, respectively—can vary, and the resulting candlestick looks like a cross.
Morning Star Doji
A Morning Star Doji is used by stock analysts to predict price movements of a security, derivative or currency over time. It comprises three candles—a large red candlestick, a small-bodied candlestick, and a green candlestick.
- The first is a long bearish candle, indicating a long move down.
- The second is a short candlestick indicating price consolidation and indecision.
- The third is a long bullish candlestick, gaping higher than the previous candlestick.
This indicates reversal and beginning of a new uptrend. In contrast, an Evening star Doji identifies an upcoming downtrend.
A hammer is a price pattern that occurs when a stock trades significantly lower than its opening price, but rallies to close near its open. It suggests the market is attempting to determine a bottom.
Watch the full video here:
Watch the other episodes of BQLearning Technical Analysis series here:
Episode 1: BQLearning: Technical Analysis For Beginners
Episode 7: BQLearning: What Is Relative Strength Index?