What is a “tombstone” doji and what do we do when we see one is a stock we hold?

A ‘tombstone doji’ is a type of candlestick pattern. A doji is where the open and closing price are close. The closer they are, the better the indication. When a doji appears after a run up or run down, it indicates a change in direction. A tombstone doji is a doji that appears at the top of a run and the open and close price are at the bottom of the price range for the session. It is called a tombstone because of the ‘wick’ of the candlestick pattern sticks up over the open/close price, and because it portents selling ahead.