Bullish abandoned baby pattern: A stock market is a place where there is a constant battle between bulls and bears in the market and making money depends on you being on the right side.
Understanding who has the upper hand in the market can help you make better trading decisions. Candlesticks are one such indicator that can help you understand the sentiments in the market.
In this article, we will be discussing the bullish abandoned baby candlestick pattern that can help you identify the reversal trend in the market.
What is a Candlestick?
A candlestick is a type of chart that indicates the opening price, closing price, and the high and the low of security for a specific time period.
A candlestick comprises a body and a wick which shows us the information of the price in a simple and concise manner.
The body of the candle shows the price at which a security has opened and closed during a specific time period. The wick or the shadow of the candle shows the high and low security reached during a specific time period.
A Candlestick pattern formation can be divided into two categories:
- Bullish Candlestick
- Bearish Candlestick
- Indecision Candlestick
Bullish Candlestick: A candle is identified as bullish when the body of the candle is green. In this candle, the bottom of the body indicates the opening price and the top of the candle indicates the closing price.
Bearish Candlestick: A candle is identified as bearish when the body of the candle is red. In this candle, the top of the body indicates the opening price and the bottom of the candle indicates the closing price.
Indecision Candlestick: It is a candlestick pattern that has no directional bias about the market. In other words, it does not indicate the market sentiment like the bullish or bearish candlestick pattern.
Now that we have understood how a candlestick looks, we will now understand what is a Doji candlestick pattern and further discuss about Bullish abandoned baby pattern. Doji candles are an important pattern while understanding the Bullish abandoned baby pattern.
What is a Doji Candlestick?
A Doji candlestick pattern is identical to a cross as the opening price and the closing price during the session will be equal or almost the same. This candlestick pattern tells us that neither the buyer nor the sellers are gaining in the market.
What is the Bullish Abandoned Baby Pattern?
The bullish abandoned baby is a candlestick pattern that appears after the downtrend in the market. This candlestick pattern indicates an upward reversal in the market. In simple terms, it indicates the end of selling pressure from the bears and the return of bulls in the market.
Identifying Bullish Abandoned Baby Pattern
The bullish Abandoned baby pattern consists of three candlesticks that appear after a downtrend in the market.
Here the first candle will be a bearish red candle followed by a Doji candlestick and the third candle will be a long bullish green candle.
Here is the list of the criteria to be met for the formation of a Bullish abandoned baby pattern:
- The first candle will be a bearish red candle which is a part of the ongoing downtrend.
- The second candle which is the Doji candle should have a gap down from the previous candle
- The third candle must gap up and close as a long green candle.
- The bodies or wicks of the candles in this pattern should not overlap each other.
Explanation of the Bullish Abandoned Baby Pattern
Now that you have understood what a Bullish Abandoned Baby Pattern looks like, we’ll now look at the significance behind the formation of this pattern.
While the first candle indicates the upper hand of the sellers in the market, indecision occurs with the appearance of a gap-down Doji candlestick.
The final candlestick is a long green candle that opens a gap-up confirming that the buyers are back in the market and they have gained the upper hand. Panic sets amongst sellers in the market.
This is a confirmation that the market might reverse at this point and you can take a long position in the market.
The strong surge in volumes along with the bullish abandoned baby pattern will give you a greater conviction that a strong wave of buyers is entering the market.
Also Read: 10 Most Important Patterns in Trading That Traders Should Know!
In this article we discussed the formation of a bullish abandoned baby, the reason behind the formation, and what the formation indicates.
Though the bullish abandoned baby is a rare candlestick pattern, it gives a fairly accurate prediction of the reversal in the market. But, the individuals are also advised to confirm the reversal using other technical indicators and set a stop-loss while trading using this pattern in the market.
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