Trade Mini Course - Yin Yang Candle Patterns
Hollow reversal pattern: dragonfly cross
If closing price = open price, then on the K-line chart, a cross pattern appears, indicating that the long and short power of the market is roughly in equilibrium.
However, if a Doji appears in a clear uptrend or downtrend, it could be an important signal of market reversal.
This article will introduce a special form of the Doji - Dragonfly Cross.
What is Dragonfly Cross?
The Dragonfly Cross is a single candlestick pattern that has the same opening, closing and high prices, but the lowest price is significantly lower than the other three prices. Therefore, the dragonfly cross looks like a “T” font: there is no visible upper shadow, but with a long lower shadow line.
Dragonfly cross implies that the market or reversal will occur, and the direction of the reversal may be both an upside or a downside, mainly depending on previous price movements.
If the Dragonfly Cross appears in an uptrend, implies that the market may reverse to a fall, the basis for confirmation is to see whether the stock price is closed down on the next trading day; on the contrary, if the pattern appears in a downtrend, it implies that the market may reverse to rise, and confirm the basis is to see whether the stock price of the next trading day rises.
How was a dragonfly cross formed?
If the Dragonfly Cross appears in a downtrend, it indicates that there was a great pressure on the market that day, making the stock price undergo a clear downturn after opening.
However, the overrun is absorbed by the bulls, the stock price rebelled at an abort, and the final closing price is almost flat with the opening price, suggesting that bulls gradually recover the weakness, which is a potential bullish signal.
To confirm the bullish dragonfly cross pattern, wait until the next trading day. If the stock price rises on the next trading day, the market is more likely to reverse to rise.
Another case is that if the dragonfly cross appears in an uptrend, it releases a bearish signal.
In this case, the pattern shows that the bearish once occupied the advantage, although the stock price was pulled up again in the intraday, but the closing price remained near the opening price, indicating that the short sides have remained unrelated after intense gaming, but considering that the market was previously in an upward trend, so the sudden increase of short strength, is A potential bearish signal.
To confirm the bearish dragonfly cross pattern, wait until the next trading day. If the stock price falls on the next trading day, the market is more likely to reverse to a fall.
How to identify a dragonfly cross?
In actual combat, investors can pay attention to the following key points to identify the dragonfly cross pattern.
Upfront Trend
A dragonfly cross usually appears at the top of an uptrend or the bottom of a downtrend. If the pattern appears in the shock city, investors may choose to ignore it.
Doji
The dragonfly cross is a special form of the Doji, so there is no obvious entity that appears.
Long Lower Shadow Line
Dragonfly cross with a long lower shadow, indicating that the short once occupied an advantage, the stock price obviously downward in the intraday, but the final closing rebated near the opening price.
Confirmation of morphology
Bullish Dragonfly Cross confirms that this pattern appears in a downtrend and the stock price closed up on the next trading day. Similarly, the basis for bearish Dragonfly Cross confirmation is that the pattern appears in an uptrend and the share price falls on the next trading day.
case analysis
Below, we take a dragonfly cross pattern that appeared in 2018 with the share price of Barrick Gold Company (NYSE: GOLD).
Before the Dragonfly Cross, Barick Gold shares were on a downward trend.
The dragonfly cross appeared the day, the stock price opened low.
Subsequently, the market overrun continued to appear, and the stock price further lodged down.
After the share price fell to a new low, the long gradually entered the field and recovered most of the ground.
As of closing, the stock price rebated to a slightly lower position than the opening price, resulting in a small, solid dragonfly cross pattern with a long undershadow.
The next trading day, the share price closed up, which helps confirm that the trend may rise from a decline.
summed
In general, a dragonfly cross is a reversal candlestick pattern that may appear in an uptrend or downtrend.
This pattern helps investors identify potential buying or selling opportunities.
In combat, investors should combine with other technical analysis tools to better aid trading decisions.
