Every Sunday, we will go through our list of dojis for the week and
see if there is one stock worth taking a look at. This will not be any
recommendation to buy or sell. Instead it will be more of a recap of how
the stock performed after the doji alert was posted.
For this past trading week from June 8th to June 12th, traders had an exciting (or depressing) week full of volatility. With a big pulls from the bulls and the bears, the list of dojis alerted had some high flying stocks like AMZN (June 10th) and TSLA (June 9th). The pick to analyze this Sunday, however, is AbbVie, Inc (ABBV) which was alerted on June 10th.
On June 10th, ABBV hit its 52 week high and ended the day trading back to where it started forming what is called a gravestone doji. The gravestone doji has other names also: shooting star or as one other StockTwit user replied was a finger.😂
Whatever you want to call this type of doji, the results of the following trading days are a reversal of the upward trend if the doji is confirmed by the price action of the stock. Notwithstanding, the overall market was getting overheated from buyers. So does seeing a gravestone doji mean now is the time to short the stock? Not necessarily. Remember anything can happen in the stock market and technical analysis is not always correct.
Lets look at Facebook, Inc (FB) for an example. Below is a small snippet of a chart of FB on the day ending May 5th. The candle looks like a gravestone doji that day.
If you were trading FB, would you think that now is the time to short FB? It was approaching the previous price levels before COVID-19 pandemic and many people were surprised the stock market was able to recover so fast from the drop in March.
Also for reference with the green arrow, a previous example which looks close to a gravestone doji (but more like a spinning top candle) showed a reversal the proved to be true on March 31st. So would FB play out in another reversal? Below shows what played out after the gravestone doji appeared.
It would not be until a couple days later that a reversal finally took place. So gravestone dojis are not always correct in predicting a reversal of an uptrend. This all being said, a reversal did end up taking place with ABBV. What ended up being different from FB was two things: FB did not hit its 52 week high and ABBV had a consecutive run of green candles that led up to the gravestone doji.
The run up of ABBV had a chart pattern of the three white soldier candlesticks. While the soldier phase ended up proving to be another leg up for the stock, the gravestone doji put its stamp to end the run. Hopefully followers were able to make a determination to sell their ABBV position after seeing the gravestone doji. With ABBV still being a hot stock to follow and since drugmakers and healthcare sectors are holding up better than most sectors, it would not be surprising to see ABBV buck the downward trend it appears to be forming.
Hope you enjoyed today's analysis. Best of luck to you all and may the odds be in your favor.
Disclosure:
I do not currently hold any position in ABBV. None of the information provided is a recommendation to buy or sell any stock and is for informational use only. Please do your own due diligence before investing in any security and contact your financial professional for investing advice.
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