Abandoned Baby is a candlestick pattern that is considered to be a bearish reversal signal. The pattern consists of three candles, with the first and third candles being long and of opposite colors, and the middle candle being a short doji (a candle with a small real body and long upper and lower shadows).
The Abandoned Baby pattern typically forms after a prolonged uptrend or downtrend and represents a sudden shift in market sentiment. The first long candle reflects the existing trend, while the second doji candle indicates indecision in the market. The third long candle, which is usually in the opposite direction of the first candle, signals a change in trend.
Traders who spot an Abandoned Baby pattern may take it as a signal to sell or short the market, as it suggests that bullish momentum has been exhausted and that a trend reversal may be imminent. However, like all technical analysis patterns, it is important to use other indicators and confirmations before making trading decisions based on the Abandoned Baby pattern alone.
The Two Types of Abandoned Baby
There are generally two types of Abandoned Baby patterns that traders may look for:
- Bullish Abandoned Baby: This pattern occurs at the end of a downtrend and is considered to be a bullish reversal signal. It consists of three candles, with the first and third candles being long and of opposite colors, and the middle candle being a short doji. The doji candle indicates indecision, and the third candle opens higher than the previous candle’s close, suggesting that buyers have taken control of the market.
- Bearish Abandoned Baby: This pattern occurs at the end of an uptrend and is considered to be a bearish reversal signal. It also consists of three candles, with the first and third candles being long and of opposite colors, and the middle candle being a short doji. The doji candle again indicates indecision, but the third candle opens lower than the previous candle’s close, suggesting that sellers have taken control of the market.
The following criteria will help you identify an Abandoned Baby pattern
Bullish Abandoned Baby
- In a downtrend, there must be a large black (or red) candlestick.
- A doji that gaps below the close of the first candle must come after the black candle.
- The last candle in the three-candlestick pattern must be white (or green) and open above the doji.
Bearish Abandoned Baby
- In an uptrend, there must be a large white (or green) candlestick.
- The white candle must be followed by a doji that gaps above the close of the first candle.
- The last candle in the three-candlestick pattern must be black (or red) and open below the doji.
It’s important to note that while the Abandoned Baby pattern can be a useful tool for identifying potential trend reversals, traders should not rely on this pattern alone. False signals can occur, and traders should use other technical analysis tools and confirmations before making trading decisions.
