A Doji Candlestick at Resistance...
The QQQQ spent Friday within the same narrow trading range that was established on Thursday. Notice, however, that Friday's price action resulted in a
Doji Candlestick on the Daily Chart.
On Monday, traders will focus on how Friday's
Doji Candlestick plays out.
A
Doji Candlestick is one whose opening price and closing price are either equal or nearly equal, thereby, resulting in a candlestick that has a very
thin body (as does Friday's Candlestick).
A Doji can occur at any time. One that occurs at an area of Resistance, however, demands special attention. That's because
a Doji at Resistance is often the first sign that the preceding uptrend is preparing to pull back.
In any case, a Doji, by itself represents "indecision". Therefore, a subsequent
confirmation candlestick is required to clarify a stock's next direction.
A subsequent candlestick that
closes below the low end of a Doji Candlestick is often accepted as a
confirmation that the preceding up trend is now ready to pull back and, therefore, constitutes a "Sell" Signal in the minds (and actions) of many traders.
On the other hand, a subsequent candlestick that
closes above the high end of a Doji Candlestick suggests that the Doji was simply a pause in a continuing up trend.
Traders, therefore, have a special interest in where
Monday's confirmation candlestick closes.
