Japanese Candlestick reversal warning patterns do not work every time. However, when a particularly bearish pattern such as two back-to-back Doji appear at the top of a long price advance, the follow-on result can be devastating.
One of the most important Japanese Candlestick reversal warning patterns is the "Doji," in which the Open and the Close during a given time period are the same, or very nearly so. The appearance of a Doji at the top of a long price rise is a potent warning of a probable decline in prices. When two Doji arrive there, back to back, we take special notice.
The chart patterns for the Dow Jones Industrial Average (DJIA) from October 1987 (Black Monday)& May 2011 and Nifty for Aug. 2014 show creepily similar candlestick patterns.
On October 2, 1987, the first of two Doji appeared. The Open and the Close of that Doji in the Dow Jones Industrials Index on that day were 2639.20 and 2641.00, respectively. The second of the two Doji appeared on the next trading day, October 5, its Open and Close being 2641.00 and 2640.20 respectively. (See chart below.)
Two Candlestick Doji appeared, back to back, on May 2 and 3, 2011. The Open and the Close of the Dow Jones Industrials Index on May 2 were 12810.20 and 12807.40, respectively.