Business, Legal & Accounting Glossary
The Bullish Abandoned Baby candlestick pattern is a reversal pattern after a bearish trend, characterized by a gap-down Doji, which is then followed by another gap in the opposite direction with the third day being an “up day”. The shadows on the Doji must completely gap below or above the shadows of the first and third day.
The bullish abandoned baby is a rarely seen candlestick charting pattern that traders consider reliable at predicting reversals. Three candles comprise the bullish abandoned baby: a long black candle the first day, followed by a Doji candle the second day that gaps below the black candle, followed by a white candle the third day that gaps above the Doji. If the bullish abandoned baby occurs during or soon after a downtrend, it signals the reversal of the downtrend. Some traders consider the bullish abandoned baby more reliable when used with other technical indicators (eg: RSI, MACD, stochastics, etc.). In foreign exchange markets, the bullish abandoned baby pattern manifests itself with a slight difference. Because gaps are very rare in currency trading, the Doji element in the forex version of the bullish abandoned baby doesn’t require a gap down, and the following white candle doesn’t require a gap up. The counterpart to the bullish abandoned baby is the bearish abandoned baby.
The Bullish Abandoned Baby Candlestick pattern reflects a classic three-period reversal of market sentiment where after a bearish trend, finally enough buyers enter the market to take control. This is first reflected by the doji formation where markets trade in a small range suggesting uncertainty in trend and a rally potential. After day two we actually have a Bullish Doji Star, moderate strength bullish pattern and then ultimately a reversal in the direction of the market signified by a large bullish candle which confirms that buyers are staging a rally and reversal.
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This glossary post was last updated: 23rd March, 2020 | 2 Views.