This candlestick is a type of Doji characterized with no lower shadow but a long upper shadow. It is also known as the Gravestone Doji.
Recognition Criteria
1. The length of the body is null or close to null.
2. There is no lower shadow.
3. The upper shadow is long.
Candlestick Requirements and Flexibility
The body should be colorless and have zero length. However, candlesticks with close-to-zero body lengths and white or black body colors are also acceptable. Only the upper shadow exists and it is long.
Trader’s Behavior
The Inverted Umbrella indicates that buyers dominated trading and they were able to drive prices higher during the day. However, sellers resurfaced by the end of the day and pushed prices back to the opening price level and to the day’s low.
The Inverted Umbrella has the potential to point out evidence for buying pressure and indicate a potential bullish reversal if it appears after a long downtrend, long black candlestick or if it is seen at a support level. Likewise it may show a failed rally and indicate a potential bearish reversal if it appears after a long uptrend, long white candlestick or if it is seen at a resistance level. Bearish or bullish confirmation is required in both situations.
Candlesticks are wonderful indicator to use. But normally doji is meant for equal strength of buyer and seller. It is better not to trade during this time since market can be going to either up or down.
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