Sensex: 2 Dojis in a Row + Inside Bar Making Bulls Cautious!

  • Stock Market Analysis
  • Editors Pick

A Doji candlestick pattern often indicates indecisiveness among market participants. In this, the market/stock opens the session, moves wherever it wants and then closes back at around the opening price. This price action leaves a “plus-like” (+) candle on the chart. When this pattern is spotted at extreme levels (overbought/oversold zones), they are used to gauge a reversal.

Looking at the daily chart of Sensex (spot), the index made a Doji candle in two consecutive sessions, ending Wednesday. This is not a good sign as the market is getting unsure of a direction at the very top and more often than not, it leads to a reversal.

However, to play the reversal move, traders need to wait for some indication that denotes selling pressure. This could be a break below the Doji’s low, a sell signal by the RSI (reading falling below 70), or any other indication.

Image Description: Daily chart of Sensex (spot)

Image Source: Investing.com

In the case of Sensex, none of these selling indications have materialized, meaning the short signal is not there yet. On top of that, today, the index formed an inside bar pattern which is a volatility contraction pattern and is generally used by swing traders. This is a carbon copy of a Harami candlestick pattern. It is a two-candlestick pattern wherein the first one is a long-bodied candle and the second one is small-bodied. The entire range of the second candlestick (high to low) falls within the entire range of the preceding candle.

This pattern is traded when either the upper or the lower trendline is broken. These trendlines are formed by joining the respective highs and lows of these two candlesticks. And then the trade is taken in the direction of the breakout.

This might look a bit complex, but I have tried to explain this sell signal via the chart. If the index goes below today’s Doji’s low of 65,256.91 (spot) then traders might be able to see a good long-pending correction. On the contrary, if the upper trendline gets breached, then the uptrend will likely resume. One thing to note, the trend is extremely positive and this correction (if occurs) would just be a part of the ongoing bull run.

Read More: 2 Breakout Shares of Tuesday to Keep a Tab On!

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  • Prasenjeet Dutta @Prasenjeet Dutta
    A Big and Great Analysys in this conclusive situation. Thaks for Your kind Guidelines.
    Like 2
  • namami ghosh @namami ghosh
    brilliant explanation 🙏👍
    Like 1
    • Aayush Khanna @Aayush Khanna
      Thanks, Namami :)
      Like 1
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  • Pravin Chandan @Pravin Chandan
    great sir
    Like 1
    • Aayush Khanna @Aayush Khanna
      Thanks, Pravin :)
      Like 1
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  • surendra shinde @surendra shinde
    Thanks for the narration
    Like 0
    • Ramana Reddy Mulukuru @Ramana Reddy Mulukuru
      nice
      Like 0
    • ARCHANA MANOLE @ARCHANA MANOLE
      VERY VERY INFORMATIVE NOTE
      Like 0
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  • kamal doshi @kamal doshi
    you are correct But Look at to The Most reliable chart form and it's says up trend May not Distributed un till we May Get Clo Below 19254 ... Spot for Continuous 2 day's
    Like 0

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