Bearish Abandoned Baby Candlestick Pattern
Bearish Abandoned Baby Candlestick Pattern: Technical analysts use various methods to predict future movements in stock prices. Technical analysis is derived from past price reactions and uses this to predict future price reactions.
One method of technical analysis is candlestick patterns. This article discusses one of the rarely formed candlestick patterns called the Bearish Abandoned Baby candlestick pattern.
Bearish Abandoned Baby Candlestick Pattern – Definition
The Bearish Abandoned Baby candlestick pattern, consisting of three candles, indicates a negative change in market sentiment. Similar to the evening doji pattern, this pattern is most effective following an uptrend, increasing the likelihood of a successful downside reversal.
The Bearish Abandoned Baby pattern is a rare but powerful candlestick pattern that signals a bearish reversal in the market. This pattern has a similar candlestick component to the Evening Doji Star pattern. However, the low point of the Doji candle in this pattern is completely separate from the other two candles, suggesting an abandoned baby.
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Bearish Abandoned Baby Candlestick Pattern – Formation
In order for a three candlestick pattern to be called a Bearish Abandoned Baby candlestick pattern, several conditions must be met and they are:
- The first candle should be a long candle with an upward trend.
- The second candle should form a doji, characterized by a small body, and should form higher than the high point of the previous candle. Additionally, the low point of this Doji candle should not touch the high point of the previous candle.
- The third candle should be a long bearish candle starting below the low of the previous Doji candle. Additionally, the high must be lower than the low of the previous candle.
Bearish Abandoned Baby Candlestick Pattern – Meaning
The Bearish Abandoned Baby candlestick pattern often indicates a change in market sentiment and can indicate the conclusion of a bullish trend. Initially, a green candle is a sign that the price will continue to rise due to increased buying activity. Next, a separate doji candle symbolizing the moment appears. equilibrium This means that buying and selling pressure is weakening and the trend is weakening.
Finally, a red candle is formed, and the highest price does not exceed the low of the previous candle. This indicates that selling pressure has overwhelmed buying pressure, suggesting a change in market sentiment. Based on the formation of this pattern and its confirmation by other indicators, traders can choose to take a sell position.
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Bearish Abandoned Baby Candlestick Pattern – Trading Ideas
Traders looking to trade based on this pattern must ensure that the trend before the pattern was formed was an uptrend. Once this is confirmed, here are the instructions for trading:
- entry: In a Bearish Abandoned Baby pattern, if the stock begins to trade below the closing price of the third candle, traders may consider taking a short position.
- Target: Traders have the option to exit the trade when the stock price approaches the nearest support level. Once this level is reached, you can take a partial profit and hold the remaining position until the subsequent support level.
- Stop Loss: Traders can place a stop loss near the high price of the evening dojistar candlestick pattern.
Bearish Abandoned Baby Candlestick Pattern – Example 1
In the HDFC BANK daily chart above, we can see that a bearish abandoned baby candle pattern has formed following a small uptrend. As discussed above, stock prices have trended downward since this pattern was formed.
At the time this pattern was formed, the trader could have taken a short position at Rs.922.75 and the stop loss was Rs. 1019.2
Bearish Abandoned Baby Candlestick Pattern – Example 2
In the MMTC 1-day chart above, you can see that a bearish abandoned baby candle pattern has formed following a small uptrend. As discussed above, stock prices have trended downward since this pattern was formed.
When this pattern was formed, the trader could take a short position at Rs.78.2 and the stop loss was Rs.89.15.
Difference Between Bearish Abandoned Baby and Evening Doji Star Candlestick Patterns
The Evening Doji Star consists of three candles: a large candle, followed by a Doji candle, and finally a large bearish candle. Here, the high point of the Doji candle is within the range of the other two candles in the pattern.
Although weak abandoned babies share similar characteristics to abandoned babies, evening doji star patternThe low of the Doji candle in this pattern is completely separate from the lows of the other two candles.
Both patterns imply a bearish reversal, but the bearish Abandoned Baby pattern has a higher probability of success than the Evening Doji Star pattern.
Bearish Abandoned Baby Candlestick Pattern – Key Features
The characteristics of the Bearish Abandoned Baby candlestick pattern are as follows:
- Initial green candle: The pattern begins with a long candle, indicating a continued upward trend in the market.
- Doji candle: The initial green candle is followed by a doji candle, which signals market indecision and suggests that the uptrend may be weakening. This candle is also separate from the other two candles in the pattern.
- Gap down: The Doji candle is followed by a third bearish candle that opens well below the previous candle’s closing price, creating a gap between the two candles.
- Highest point of the third candle: The high point of the third candle does not exceed the low point of the Doji candle, which indicates that sentiment is shifting from bullish to bearish as selling pressure increases.
- Check volume: Ideally, volume should increase while the pattern is forming, confirming the possibility of a trend reversal.
- mark: This pattern signals a bearish reversal, and the probability of success increases if this pattern is formed after an uptrend.
Read more: Grindwell Norton’s fundamental analysis
conclusion
In this article, we have gained a detailed understanding of one of the rarely formed candlestick patterns called the Bearish Abandoned Baby candlestick pattern. We discussed how these patterns form, how to identify them, the underlying reasons why they form, and how to trade based on them.
It is also important to understand that technical analysis can never be 100% accurate, so traders should always set an appropriate stop loss to reduce losses in situations where a trade goes against the analysis.
Written by Praneeth Kadagi
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