Bearish flag
Doji candlestick pattern is a reversal candlestick pattern and can be used as a continuous pattern as well. Usually occurs at the resistance levels on the chart. They also appear at the bottom of a pull back from a trend. It could show in one of these ways.
Important to note, it’s not a doji unless it was preceded by a bull or bear rally.
The graveyard Doji appears where the market opens and closes at the same level or very close, while the highs/low are high. It shows that the trend is loosing strength
We have a doji/kangaroo tail candlestick pattern on BHP Group PLC.
Daily Chart analysis
Which suggests a reversal of the, and allows for a tight stop. Looking at the big picture The doji/Kangaroo tail occurred at a string history area of resistance.
Trade plan
I am going to place a sell stop order below the low of the doji at R47.57, with a stop above the high of the doji at R48.49 and my first target being the close of the gap. My second target being the second gap at R35.
Trigger
My trigger for this is the doji itself.
Confirmation
If the price trades below the trigger candle is a confirmation. I will automatically be taken in when my sell stop order is hit
Stop loss
My stop loss will be above the high of the doji candle.
Target
Target is the close of the gaps.
Perfect trade
[] Did I get the trigger (The doji candle)
[] Did I get confirmation (price trading lower than low of the low of the doji)
[] Did I enter as per plan (Sell stop order)
[] Did I set my stop loss
[] Did I set my position size
[] Did I monitor the trade well
[] Did I exit as per the plan (Target or Stop)
Other things to look out for
I am also watching out for an Island reversal pattern. If/when we get an Island reversal because the share gapped up. If it gaps down confirming the Island reversal, I will add on the trade and move my stop of the initial trade into break even. Moving my stop to break even reduces my initial risk. And I will add to the trade, now targeting the close of the second gap.
Reversal patterns are quite rare and risky that’s why I have a tight stop.
If the price closes the gap without confirming an Island reversal, I will close half my position and adjust my stop into breakeven or better. I will trail my stop behind me. Placing it above the high of every red candle.
Updates
- On 26 August 2020 updated stop loss by 2XATR to 46.93 securing R20.62 so far