When a doji signals a potential reversal on a daily chart, does the reversal have to occur the next day? (September 27, 2001)

  You are correct in saying a doji signals a 'potential' reversal. A doji rarely means 'buy' or 'sell' all by itself. We need to see a confirmation of the move. Even when we see a doji on support or at resistance and the volume looks right (e.g., falling volume on a rise to resistance in an overall downtrend), we look for the stock to start making the move in the direction we want before we move in. Doji's are a signal or an alert that something good could be about to happen; they need to be followed up with the move.

That said, the reversal does not have to occur the next day. There can be another day where the stock does not go much of anywhere and then starts to move the following session. Now, the stock cannot tank the next session when you were looking for a doji to give way to an upside move. Moreover, we would always prefer to see a doji that indicates a reversal be immediately followed by the actual reversal continuing. It is a stronger move. The doji indicates that the buyers caught up with the sellers (on a falling stock) or that the sellers caught up with the buyers (on a rising stock). We want to see that trend continue unabated to give the strongest move.


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