A doji star is a doji that opens with a gap either above or below the previous candlestick in the direction of the current trend. When a doji star appears in an uptrend or a downtrend, it can potentially signal a change or break in the trend.
Let’s take a look at how a doji star can potentially forecast changes or breaks in trends by examining the Evening Doji Star and the Morning Doji Star.
Evening Doji Star
An Evening Doji Star can potentially indicate the top of an uptrend. The Evening Doji Star will gap up above the previous white candlestick and signal a conflict between bullish and bearish sentiment.
If the candlestick following the Evening Doji Star is black and descends into the white candlestick that preceded the Evening Doji Star, then the break in uptrend is confirmed. See Figure 1 below.
Morning Doji Star
In contrast to the Evening Doji Star, the Morning Doji Star can potentially indicate the bottom of a downtrend. The Morning Doji Star will gap down below the previous black candlestick and signal a struggle between buyers and sellers.
If the candlestick following the Morning Doji Star is white and rises up into the black candlestick that preceded the Morning Doji Star then the break in downtrend is confirmed. See Figure 2 below.
In both cases the first candlestick that follows the doji star is used as confirmation of a break in the trend. In the case of the Evening Doji Star, if the last candlestick in figure 1 were white instead of black, then the doji star warning would be negated.
Also in the case of the Morning Doji Star, if the last candlestick in figure 2 were black instead of white, the break in the downtrend would not have been confirmed. It’s also important to remember that no single piece of technical analysis is guaranteed to be 100% reliable all the time.
There are no chart patterns, no signals or indicators that will forecast exactly the same thing in every situation. Please keep that in mind as you consider these and other candlestick chart patterns.
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