Northern Doji Candlestick Patterns
Northern Doji candlestick patterns are very strong bearish reversal candlestick patterns. Maybe I wasn’t clear enough so let me repeat it one more time. Maybe this time will be with a little more emphasis. Northern Doji candlestick patterns are very strong bearish reversal candlestick patterns.
A Northern Doji candlestick pattern is the general terminology used for any type of Doji candlestick pattern that develops at the top of an uptrend (hence the “Northern” reference).
The longer that the uptrend is that precedes a Northern Doji candlestick, the greater the chances are that the Northern Doji to signal a trend reversal. At the very minimum, the price may see a consolidation period.
There are several specific types of Northern Doji candlestick patterns. Some of the specific types of Northern Doji candlestick patterns are as follows:
- Abandoned Baby Top
- Evening Doji Star
- Gravestone Doji
- Hanging Man
- Long-Legged Doji (not illustrated)
- Shooting Star
While Northern Doji candlestick patterns can come in many shapes and sizes, all Northern Doji candlestick patterns have at least 3 things in common.
- All Northern Doji candlesticks develop at the top of established uptrends (hence the “Northern” reference)
- All Northern Doji candlestick patterns are considered bearish reversal candlestick patterns
- All Northern Doji candlestick patterns have a longer than average upper or lower shadow
Requirements
Each of the above illustrated Northern Doji candlestick patterns have some general, but also some individual requirements that vary between the candlesticks.
Therefore, please refer to each candlestick’s webpage for its individual, detailed requirements.
Characteristics & Observations
Listed below are some of the other characteristics for Northern Doji candlestick patterns, as well as some of my personal observations for trading and investing.[s2If !current_user_can(access_s2member_level1)]…..
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- While there are times when Northern Doji candlestick patterns act like continuation candlestick patterns, statistically most Northern Doji candlestick patterns act like bearish reversal candlestick patterns
- When Northern Doji candlestick patterns are accompanied by heavier than normal trading volume, the chances that the Doji are signaling a major trend change from its current uptrend to a new downtrend are increased significantly
- While longer-lasting corrections are already anticipated when a Northern Doji candlestick pattern develops, heavier than normal trading volume indicates an even longer correction period
- Expect extremely stiff resistance on any subsequent re-tests of the resistance area from a Northern Doji candlestick pattern; multiple attempts are typically needed to break through & close above its resistance area
- When a Northern Doji candlestick pattern develops, it is extremely important to analyze the stock’s chart to determine where the stock’s share price may be in the “trend of one larger degree“.
Resistance Area
In general, the very tops of Northern Doji candlestick patterns are the resistance areas for the candlesticks. There are some exceptions but these statements are true for most Northern Doji candlesticks.
- If a Northern Doji candlestick pattern has an upper shadow, the very top of the upper shadow is the resistance area
- When a Northern Doji candlestick pattern does not have an upper shadow, the very top of the real body is the resistance area
In order to negate the resistance area from a Northern Doji candlestick pattern, a subsequent candlestick must close above the resistance area.
As with any type of resistance area, whether it’s from a candlestick pattern, a trendline or a moving average line, a resistance area is negated when a stock or index’s share price closes above the resistance area.
Typically the share price will need to see a trading period or periods that include(s) extremely heavy buying volume to not only break through a Northern Doji candlestick pattern’s resistance area, but also close above the resistance area and negate its effects.
Bullish Counter-Part
The bullish counter-part to the Northern Doji candlestick pattern is the Southern Doji candlestick pattern.
Northern Doji candlestick patterns develop at the top of established uptrends while Southern Doji candlestick patterns develop at the bottom of established downtrends.
Since several Southern Doji candlestick patterns look extremely similar to Northern Doji candlestick patterns, be certain to know where you are at in the trend. If you don’t interpret the trend correctly, you could end up analyzing the wrong set of Doji candlestick patterns.
Analyzing the “trend of one larger degree” is important when Doji candlestick patterns develop on a chart.
Trading Strategies
Northern Doji candlestick patterns are bearish reversal candlestick patterns. Once a Northern Doji candlestick pattern of some sort is identified, start scaling-out of your position, especially when the Northern Doji candlestick pattern is accompanied by heavier than normal trading volume. Determine if you are going to use a 2 step or a 3 step scale-out process.
When determining the scale-out strategy, also take this into consideration – Northern Doji candlestick patterns that develop on heavier than normal trading volume are not only major sell signals, but they also provide very stiff resistance areas down the road.
Real Chart Examples
Refer to the specific type of Northern Doji candlestick pattern for examples of that specific Doji candlestick.
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