The term ‘DOJI’ can be interpreted as ‘neutral’, which means that the price movement is neither upward nor downward. The shape of this candlestick pattern resembles like a star which was originally a Japanese term later considered as a star by the Western people. The appears to be a star which is nothing but a candlestick which represents a closing price being somewehere in the similar price range of the opening. There are two types in this formation which are the morning star and evening star. The evening star represents the beginning of a bearish pattern after a bullish outlook, which usually occurs after a recent rise in trend of the prices. Then, there appears a star succeeding which there appears to be a gradual decrease in the prices. Based on this theory, the appropriate entry price, stoploss and the target prices are determined. Since there is an downward movement in the prices of the stock, the position to be adopted by the trader is short position.
The above theory is applied on the company ‘GAIL’ during the period from 3rd of December 2017 to 30th of December 2017 wherein the evening star has appeared after a recent increase in prices, and witnesses a fall in prices thereafter. The DOJI is also supported by a good volume of stocks trade during the period as shown in the chart. Keeping this in view, the entry price, target and the stop loss have been determined.
