What is a Bullish Dragonfly Doji?
The Bullish Dragonfly Doji Pattern is a single candlestick pattern that occurs at the bottom of a trend or during a downtrend. The Bullish Dragonfly Doji Pattern is very similar to the Bullish Hammer Pattern.
The distinction between the two is if there is a body or not. In the case of Bullish Dragonfly Doji Pattern, the opening and closing prices are identical and there is nobody. On the other hand, the Bullish Hammer Pattern has a small real body at the upper end of the trading range.
Recognition Criteria for Bullish Dragonfly Doji Pattern:
1. There is an overall downtrend in the market.
2. Then we see a Doji at the upper end of the trading range.
3. The doji has an extremely long lower shadow.
4. However, the doji does not have any upper shadow.
The explanation for Bullish Dragonfly Doji Pattern:
The market is in an overall bearish mood characterized by a downtrend. Then market opens and sells off sharply. However, the sell-off is suddenly abated and the prices reverse direction and start going up for the rest of the day closing at or near the day’s high thus leading to the long lower shadow.
The failure of the market to continue in the selling side reduces the bearish sentiment. Now the shorts are increasingly uneasy with their bearish positions. If the market opens higher next day, many shorts will have a strong incentive to cover their short positions.
Important Factors for Bullish Dragonfly Doji Pattern:
The Bullish Dragonfly Doji Pattern is a more bullish signal than a Bullish Hammer Pattern. Its reliability is also higher than the Bullish Hammer Pattern.
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