Butterfly Doji on the Daily S&P Chart

By | May 19, 2016

The 2040 level on the S&P was broken at the open today and then retaken later in the session and held into the close; the result of either a complete round-turn in trader sentiment or the inverse operation of an algorithm, either way the action formed a “butterfly doji” candle on the daily chart.

1000131.Butterfly doji

This candle has a narrow opening and closing range like a normal doji but it is positioned at the upper end of its range and has a long lower shadow. It suggests that the forces of supply and demand achieved equilibrium after first testing lower prices, and is considered a bullish reversal candle when it occurs at important technical levels. The chart notes two other butterfly doji candles that didn’t indicate major reversals but did see minor follow-through.

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