A Gravestone Doji is a bearish candlestick pattern in technical analysis that occurs when the opening, closing, and low prices of an asset are nearly identical, while the high price creates a long upper shadow. This pattern typically forms at the end of an uptrend and is considered a potential signal for a reversal, indicating that the buyers drove the price up during the trading session, but by the end, the sellers pushed it back down to near the opening level.

The appearance of the Gravestone Doji suggests that bullish momentum is weakening, and bears may be gaining control. It is named “Gravestone” because it resembles a gravestone, symbolizing the possible “death” of the prevailing uptrend.

Key characteristics of a Gravestone Doji:

1. Open, Low, and Close Prices: These are almost identical or very close to each other, forming the base of the candlestick.
2. Upper Shadow: The long upper shadow represents the high point reached during the trading session, indicating that buyers tried to push the price higher, but their efforts were unsuccessful.
3. Lack of Lower Shadow: There is typically no lower shadow, or it is very minimal, indicating that the price did not fall significantly below the opening level during the session.

When interpreting a Gravestone Doji, it is important to consider the following:

• Location in the Trend: A Gravestone Doji appearing after a strong uptrend can be a stronger reversal signal, especially if it is followed by a bearish candlestick, confirming the potential downtrend.
• Volume: Higher trading volume on the Gravestone Doji day can increase the reliability of the pattern as a reversal signal.
• Confirmation: Traders often look for confirmation of the reversal by waiting for the next candlestick. If the next candlestick closes below the Gravestone Doji’s close, it strengthens the bearish reversal signal.

In summary, the Gravestone Doji is a visual indicator of a potential bearish reversal, particularly after an uptrend, and suggests that the upward momentum has exhausted, with sellers potentially taking control of the market.