What is a 'Gravestone Doji'

A gravestone doji is a bearish reversal candlestick pattern that is formed when the open, low, and closing prices are all near each other with a long upper shadow. The long upper shadow suggests that the bullish advance in the beginning of the session was overcome by bears by the end of the session, which often comes just before a longer term bearish downtrend.

BREAKING DOWN 'Gravestone Doji'

A gravestone doji pattern is a popular bearish reversal pattern characterized by open, low, and closing prices that are all near each other and a long upper shadow. While the open, low, and closing prices don't have to be equal for the pattern to be valid, there should be a relatively small tail, else the pattern could be classified as an inverted hammer, shooting star, or a spinning top.

While the candlestick pattern can be found at the end of a downtrend, it's more common to be found at the end of an uptrend. The long upper shadow suggests that bulls had control over the market earlier in the session, but the bears eventually took control by the end of the session. Some studies have shown the chart pattern to be relatively unreliable compared to other candlestick patterns.

Traders will often exit long positions or initiate short positions after identifying a gravestone doji pattern, although it's important to use the candlestick pattern in conjunction with other forms of technical analysis as a confirmation. Often times, traders will also look at the volume associated with the session, as well as the previous sessions' activity, as potential indicators of the reliability of the pattern.

The opposite of a gravestone doji is a bullish dragonfly doji.

Example of a Gravestone Doji

The following chart shows a gravestone doji in Cyanotech Corp.'s stock following a significant high volume uptrend, which could indicate a bearish reversal over the near-term following the breakout.

Example of a Gravestone Doji Chart

In this example, the gravestone doji could predict a further breakdown from the current levels to close the gap near the 50- or 200-day moving averages at $4.16 and $4.08, respectively. Traders would also take a look at other technical indicators to confirm a potential breakdown, such as the relative strength index (RSI) or the moving average convergence-divergence (MACD). Day traders may also put a stop loss just above the upper shadow at around $5.10, although intermediate-term traders may place a higher stop loss to avoid being stopped out.

RELATED TERMS
  1. Dragonfly Doji

    A dragonfly doji is a type of candlestick pattern that signals ...
  2. Doji

    A name for candlesticks that provide information on their own ...
  3. Long-Legged Doji

    The long-legged doji is a candlestick pattern that consists of ...
  4. Bearish Abandoned Baby

    A bearish abandoned baby is a type of candlestick pattern identified ...
  5. Bearish Belt Hold

    A candlestick pattern that forms during an upward trend. This ...
  6. Spinning Top

    A spinning top is a candlestick pattern with a short real body ...
Related Articles
  1. Trading

    Advanced Candlestick Patterns

    Go beyond the basics! Learn to identify and trade island reversals, kicker patterns and more.
  2. Trading

    The 5 Most Powerful Candlestick Patterns

    Statistics show unusual accuracy for the buy and sell signals of certain candlestick patterns.
  3. Trading

    Candlestick Charting: What Is It?

    Discover the components and basic patterns of this ancient technical analysis technique.
  4. Trading

    Candlestick Charting: Perfecting The Art

    Take a look at continuation patterns and how they can confirm or deny trends.
  5. Trading

    Candlesticks Light The Way To Logical Trading

    Crowd psychology is the reason this technique works. Find out how to make it work for you.
  6. Trading

    Technical Analysis: Triple Tops and Bottoms

    Triple and double tops and bottoms may be tough to spot but can be powerful patterns.
  7. Trading

    Understanding the "Hanging Man": The Optimistic Candlestick Pattern

    A hanging man is a candlestick pattern that hints at the reversal of an uptrend. The candlestick is recognizable by a small box atop a long, narrow "shadow."
  8. Trading

    Candlesticks And Oscillators For Successful Swing Trades

    Take advantage of short-term price moves by pinpointing reversals.
RELATED FAQS
  1. What are the main differences between a Doji and a hammer pattern?

    Identify the differences between doji candles and hammers on a candlestick chart, and learn how traders look at each for ... Read Answer >>
  2. How do traders interpret a Dragonfly Doji pattern?

    Read about a rare but significant candlestick chart pattern: the dragonfly doji. Learn what a dragonfly doji says about a ... Read Answer >>
  3. What signals do traders watch for that signal a change in a bull market?

    Discover the various signals of bull market tops and what traders and analysts look for as signs of an impending bearish ... Read Answer >>
  4. How do I implement a forex strategy when spotting a Star Pattern?

    Learn a simple forex trading strategy designed to take advantage of market reversal indications given by three star candlestick ... Read Answer >>
  5. What are the most common Bullish patterns used by traders?

    Learn about some of the most commonly recognized bullish candlestick chart patterns that traders use to identify market turning ... Read Answer >>
  6. How do I build a profitable strategy when spotting a Three Black Crows pattern?

    Learn to identify the three black crows candlestick pattern and learn how stock market traders use the pattern to profit ... Read Answer >>
Hot Definitions
  1. Return on Assets - ROA

    Return on assets (ROA) is an indicator of how profitable a company is relative to its total assets.
  2. Fibonacci Retracement

    A term used in technical analysis that refers to areas of support (price stops going lower) or resistance (price stops going ...
  3. Ethereum

    Ethereum is a decentralized software platform that enables SmartContracts and Distributed Applications (ĐApps) to be built ...
  4. Cryptocurrency

    A digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of ...
  5. Financial Industry Regulatory Authority - FINRA

    A regulatory body created after the merger of the National Association of Securities Dealers and the New York Stock Exchange's ...
  6. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs are often issued by companies seeking the capital to expand ...
Trading Center