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Written and copyright © 2008-2009 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.
Like its sister, the bearish doji star, the bullish version does not perform in reality as it is supposed to in theory. Theory says that the bullish doji star is a bullish reversal, but
my tests show that it acts as a bearish continuation pattern 64% of the time, or almost 2 out of every 3 trades. The 64% number is misleading though. Why? Because a reversal or continuation
is dependent on the breakout direction. A breakout occurs when price closes either above the top or below the bottom of the candlestick pattern. With a bullish doji star, price is almost at the low, so
a small downward move would signal a continuation of the existing downtrend. That is much easier to achieve than is an upward breakout.
Important Results
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Theoretical performance: Bullish reversal
Tested performance: Bearish continuation 64% of the time
Frequency rank: 53
Overall performance rank: 49
Best percentage meeting price target: 59% (bull market, up breakout)
Best average move in 10 days: 5.46% (bear market, up breakout)
Best 10-day performance rank: 9 (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.
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 Bullish Doji Star
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Discussion
As I mentioned in the introduction, the bullish doji star acts as a continuation of the existing price trend 64% of the time. This is most likely because price is situated near the
bottom of the pattern, making a downward breakout likely. When price does break out, the trend ranks 49th, or mid list, so it is not a star performer either. In other words, do not expect
the downward trend to last for long. The frequency rank, at 53, is almost mid way from 1 to 103 candlestick types, so you should be able to located examples of the bullish doji star often.
The best average move 10 days after the breakout is 5.46% after an upward breakout in a bear market. A good move would be 6%, so this comes close. The best performance rank 10 days
after the breakout is 9 after an upward breakout in a bull market. That is a very high rating.
Identification Guidelines
| Characteristic | Discussion |
| Number of candle lines | Two. |
| Price trend leading to the pattern | Downward |
| Configuration | Look for a tall black candle on the first day followed by a doji (where the opening and closing prices are within pennies of each other) that gaps below the
prior candle’s body. The shadows can overlap, but the doji’s shadows should not be unusually long, whatever that means. |
Three Trading Tidbits
If you want a few bones from my Encyclopedia of candlestick charts book, here are three to chew on. The pages refer to the book
where the tips appear.
- Bullish doji star candles that appear within a third of the yearly low perform best -- page 279.
- Select tall candles -- page 279.
- Support and resistance zones are important to the bullish doji star -- page 281.
Example
Shown circled in red on the daily chart is a bullish doji star. Even though price climbs for a few days after the candlestick pattern ends,
the breakout is still downward, resuming the falling trend already underway. This bullish doji star is not bullish at all, but bearish like most of the bullish doji star patterns.
The first day of the bullish doji star is a tall black candle followed by a doji whose body gaps below the prior body. That means the closing price on the black candle is above the
opening price of the doji. The shadows can overlap and they do in this example. The shadow length on the doji is not unusually long, but that is a touchy-feely thing. Clearly they are
not like the shadows on a high wave candle or a rickshaw man.
The breakout is downward when price closes below the lowest low posted in the two-day candle, so this one
acts as a continuation of the downtrend.
Other Examples
-- Thomas Bulkowski
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