Bulkowski's Collapsing Doji Star

Written and copyright © 2008-2011 by Thomas N. Bulkowski. All rights reserved.

In my book, Encyclopedia of Candlestick Charts, pictured on the right, I explore the entire range of candlestick patterns from abandoned babies to windows (not exactly A to Z, but you get the idea), in both bull and bear markets, using almost 5 million candle lines in the tests.

The book takes an in-depth look at 103 candlestick patterns and reports on behavior and rank (3 types: reversal rate, frequency, and overall performance), identification guidelines, performance statistics (tables of general statistics, height, and volume), trading tactics (tables of statistics on reversal rates and performance indicators), and wraps each chapter with a sample trade. I share a sliver of that information below. If you like what you read here, then you will love the book. Help support this website and buy a copy by clicking on the above link.

The collapsing doji star is a very rare bird. I found just 16 of them out of 4.7 million candle lines. Thus, the statistics are subject to change and are unreliable. Those that I did find act as a bearish reversal of the upward price trend, ranking 24th. The overall performance is near the bottom of the list, suggesting that the trend after the breakout is dismal. Do not expect price to trend for long.

Concealing Baby Swallow Important Results

Theoretical performance: Bearish reversal Tested performance: Bearish reversal 63% of the time Frequency rank: 101 Overall performance rank: 97 Best percentage meeting price target: 60% (bull market, down breakout) Best average move in 10 days: 7.32% (bull market, up breakout) Best 10-day performance rank: 24 (bull market, up breakout) All ranks are out of 103 candlestick patterns with the top performer ranking 1. "Best" means the highest rated of the four combinations of bull/bear market, up/down breakouts. The above numbers are based on hundreds of perfect trades. See the glossary for definitions.

Collapsing Doji Star

Concealing Baby Swallow Discussion

As I mentioned in the introduction, the collapsing doji star is rare. If you use the one minute scale, you would have one appear on your screen every 3.3 years. My guess is you would probably be asleep at your keyboard by then and miss it anyway.

The collapsing doji star acts in theory as it does in reality, as a bearish reversal of the upward price trend 63% of the time. However, the frequency rank is 101 out of 103, so you may never find an example. The overall performance is 97th and that is because I could not find any in patterns in a bear market. That hurt the results.

The best average move 10 days after the breakout is a rise of 7.32% in a bull market. I consider moves of 6% or higher to be good ones, so the 6 patterns that qualified did well. That performance gave the candlestick pattern its best 10-day performance rank of 24th.

Concealing Baby Swallow Identification Guidelines

Concealing Baby Swallow Example

The chart shows the collapsing doji star circled in red on the daily scale. Price moves up to the start of the collapsing doji star when a white candle appears. Below that is the doji and notice that the shadows of either candle do not overlap. The last day is a black candle and again, the shadows do not overlap so the doji appears to float between the candles on either side of it.

Based on the picture, I would say that the stock during this period probably did not trade often or it split so many times that the price differences became minor, removing the shadows from the candlesticks. Perhaps both occurred.

This collapsing doji star candlestick functions as a reversal of the brief up trend when price breaks out downward. A downward breakout happens when price closes below the bottom of the candle pattern. In this example, the downtrend does not last long before price moves horizontally.

-- Thomas Bulkowski

Copyright © 2008-2011 by Thomas N. Bulkowski. All rights reserved. Look out for #1 and don't step in #2.