After an extended downtrend, the USD/JPY exhibited an exceptionally long red candle followed by a doji.
Data Sheet
1. Signal Formation
After an extended downtrend, the USD/JPY exhibited an exceptionally long red candle on August 23, 2023. Following the bearish session, the appearance of a doji gave a hint that the previous trend might be over.
![USD/JPY: Doji After a Large Bearish Candle. August 2023 (Hourly Chart)](https://www.dollarcontext.com/content/images/2023/09/CS-0001-A-Signal-Formation-1.png)
2. Early Market Transition
Without delay, the market tested the support set by the lows of the doji session. Instead of breaking through, the USD/JPY quickly reversed, forming a variation of a morning star pattern.
The morning star also acted as a spring (a false breakout to the downside). In the context of an extended downward trend, the combination of a doji and morning star, following a lengthy bearish candle, offers a potent indication of a bullish turnaround.
After the morning star, a formation resembling a piercing pattern further suggested a potential turn. The bullish trajectory of the subsequent sessions helped confirm this notion.
![USD/JPY: Morning Star and Piercing Pattern. August 2023 (Hourly Chart)](https://www.dollarcontext.com/content/images/2023/09/CS-0001-B-Progression.png)
3. Resolution
After observing these significant bullish indicators, a pronounced uptrend ensued. The rally hinted at reaching its peak through a sequence of doji sessions, which then transitioned into a sideways movement. Remaining buying momentum resulted in an upthrust (a deceptive upward breakout), culminating in a tower top formation.
![USD/JPY: Resolution of the Bullish Reversal and Peak. August 2023 (Hourly Chart)](https://www.dollarcontext.com/content/images/2023/09/CS-0001-C-Resolution-and-Top.png)
4. Conclusion
4.1 Pattern Development
We can observe an accumulation of candlestick patterns in the vicinity of a doji following a long red candle. This accumulation includes a spring, a variation of a morning star, and a possible piercing pattern.
4.2 Outcome Analysis
A positive outcome was evident as the reversal manifested in a notable uptrend.
Although the market offered multiple indications of the rally's conclusion, a prolonged upthrust made this evaluation more challenging.