Candlestick Patterns: High Close Doji

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The high close doji pattern is a two-bar candlestick pattern. In this pattern, the first day is a doji and on the second day the price closes higher than the highest high that the stock traded at on the day the doji was registered. This suggests that after a day of indecision (the doji), the market decided to buy up the stock. This could be a sign that the stock is about to rally.

Generally speaking this is a bullish sign, and this pattern usually signifies the start of a new uptrend at the end of a downtrend or after a period of sideways movement. If this pattern is created within an already established uptrend, it is natural to question how much further the stock has room to run.

The significance of this pattern is confirmed if on the day following the high close doji pattern the next candlestick closes higher yet again, suggesting that the upwards momentum is building up.

A high close doji that meets these criteria is a potential buy candidate and warrants attention.

Here is an historic example of a high close doji pattern and the implications that this chart pattern had in the future price movements of the stock:

Example: Marathon Oil (MRO)

 

On July 13th 2012, a high close doji pattern is shown in the following chart.  July 12th was a doji, and on July 13th the stock price opened higher and continued to rise throughout the day above the highest high the stock traded at on the previous day.  It then closed near the high of the day.  This suggests that there was support for the stock at the $24 level and that buyers came in and bid the price up.  The signal was confirmed on July 16th as the stock closed higher than it did on the 13th.  Over the next 5 trading days the stock rose by 10%.

 

As you can see in the following longer-term chart, this signal was the beginning of a new uptrend.  After a long downtrend, the stock had moved sideways for a few months and was ready for a new uptrend to begin.  The high close doji pattern signaled the last chance to get in at bottom level prices.