In a Doji pattern, the market explores its options both upward and downward, but cannot commit either way. After a long uptrend, this indecision manifest by the Doji could be viewed as a time to exit ones position, or at least scale back. Similarly, after a long downtrend, like the one shown above of General Electric stock, reducing ones position size or exiting completely could be an intelligent move. It is important to emphasize that the Doji pattern does not mean reversal, it means indecision. Dojis are often found during periods of resting after a significant move higher or lower; the market, after resting, then continues on its way. Nevertheless, a Doji pattern is a great sign that a prior trend is losing its strength, and taking some profits might be well advised. Two intra-day examples of how a daily Doji formation is created is presented next.
Posted on: Wed, 23 Jul 2014 15:52:23 +0000
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