The candlestick pattern Bullish Doji Star is a trend reversal formation that occurs in bear markets and all timeframes, which indicates that there is a certain probability that a change will occurs from bearish to bullish trend. This is a pattern with an average level of reliability, which can be identified as follows:
- The previous trend in the market before the pattern appears is bearish.
- In the first period a long black candle is formed
- In the second period a Doji is formed with a bearish gap in the price.
- Doji shadows (upper and lower) are not extensive.
Interpretation of Bullish Doji Star pattern
The Bullish Doji Star formation can be defined as a Doji formed after a long black candle and bearish price gap between the two candles appears during a downtrend in the market.
In theory it is an incomplete pattern, however the emergence of a Doji, especially after a relatively long downtrend, tells the trader that the movement could be drying and could be even nearing completion. Usually, this pattern indicates a change in market sentiment. The market behavior can be described as follows: Previously the bearish forces (sellers) had control of the market during the downtrend, but after the Doji occurs a change in control could be happening because of indecision demonstrated precisely by the Doji. This candle implies that the bullish forces (buyers) and the downward forces are in equilibrium. Under these conditions, the downward force is dissipating and the picture is not as favorable for the continuation of the downtrend.
One of the most important aspects with respect to this pattern or incomplete figure, which tells the trader that another and more reliable formation may appear, is that it serves as the basis for the creation of another pattern of greater relevance and importance as an indicator of a possible change in trend.
It is extremely necessary that the confirmation of the trend shift occurs in the candlestick of the third period, after the Doji (although it can also occur in this candle). This confirmation may occur in the form of a white candle, a bullish gap in the price or a higher close in the period in which the Doji appears.
If in the third period a white candle is formed, the confirmation through a Morning Doji Star pattern may occur, but if a bullish gap appears instead a white candle, the confirmation would then come in the form of a Abandoned Baby Bullish pattern.
It is also important to keep in mind that if the candle of the third period closes below support, the pattern is invalidated. This is because the support (in this case the Doji acts as a support in its lower part) has been crossed and thus is likely that prices continue its downward trajectory.
You can access more information about Japanese candle patterns in the following section: Major Candlestick Patterns.