Introduction

The Dragonfly Doji is one of the most visually distinct patterns in technical analysis. It looks like the letter “T” and represents a moment of perfect equilibrium where sellers failed completely.

While regular Dojis signal indecision, the Dragonfly appearing at a support level is a specific signal of price rejection.pattern chart" src="https://encrypted-tbn3.gstatic.com/licensed-image?q=tbn:ANd9GcTOBvsZeHlLxOIHbYqgUMIv83ZKZkWqF4QySr2uqdY3l8yzhugp-x9nx32NE8xBTwv2Ki7kIaNl3Su7VH7Tx4nsx97hx4K_WfaDKT3rrFz_wFyUKog">

How to Identify a Dragonfly Doji

1. No Body: The Open and Close prices are virtually identical.
2. Long Lower Wick: A very long shadow extending downwards.
3. No Upper Wick: The session opened, dropped hard, and rallied back to close at the exact high of the day.

The Psychology

This is a drama in three acts:

1. Bearish Attack: Sellers drove the price down aggressively, confident the trend would continue.
2. Bullish Defense: Buyers found value at the lows and bought up every single share available.
3. Total Recovery: The price closed at the very top of the session. The sellers have nothing to show for their efforts.

How to Trade It

Because the Dragonfly closes at the high, it often leads to a gap up the next day.

• The Setup: Look for this pattern hitting a major support level (like a 200-day Moving Average) or a Fibonacci zone.
• The Entry: Buy on the break of the high of the Doji.
• Stop Loss: Just below the long lower wick. If price breaks this wick, the pattern has failed, and the crash will continue.