Bullish Homing Pigeon Pattern – Strategy and Information

Bullish Homing Dove Pattern: Technical analysts rely heavily on charts and candlestick patterns to conduct comprehensive analysis of stock prices and accurately predict future movements. Each pattern formed in the market has a clear and justified reason behind its formation and indicates the market direction.

In this article, we will discuss the meaning, formation, indication of two candlestick patterns called bullish homing dove patterns and how to set up trades with these pattern formations.

Bullish Homing Dove Pattern – Definition

all Bullish Homing Dove Pattern It appears when the market is in a downward trend and its formation indicates that it is about to rise. This two-candlestick pattern consists of two bearish candles (red candles), where the first bearish candle has a larger body and the second candle is formed within the body of the first candle.

Although it is desirable to form a pattern during a downtrend, it can also be used if the pattern appears after a retracement from an uptrend.

Bullish Homing Pigeon Pattern – Formation

For a two candle pattern to form as a bullish homing dove, two conditions must be met.

Condition 1 – Both candles must be bearish candles (red candles) and the body of the first candle must be larger than the second candle.

Condition 2 – The body of the second candle must be formed within the body of the first candle.

The best scenario for this candlestick to form would be after a downtrend or during an uptrend retracement.

Psychology Behind Patterns

When the market is in a downtrend, the first red candle in the pattern is formed with a large body due to high selling in the market. The formation of a second small red candle within the first candle indicates weak selling pressure. This reduced selling pressure could bring more buyers into the market.

Therefore, the market generally tends to reverse the trend and move higher after a bullish homing dove pattern appears.

Bullish Homing Pigeon Pattern – Trading Strategy

Before entering a trade using the homing pigeon pattern, you should determine whether the security is in a downtrend or has reverted from an existing uptrend. Once these conditions are met, you can trade the Homing Dove pattern in the following ways:

• Entrance – The appropriate entry price is to take a long position just above or at the close of the second candle of the pattern. However, if a trader wants a safer entry, they should wait until a bullish candle starts trading above the high of this pattern and then make a long entry.

• target – Traders can exit a trade when the price of a security reaches near an immediate resistance zone. Once this level is reached, you can book a partial profit on the trade and hold the remaining position until the next resistance level.

• Stop Loss – The stop loss should be placed just below the low of the bullish homing dove pattern.

Bullish Homing Dove Pattern – Example

Example 1 – Bullish Homing Dove Pattern Forming in a Downtrend

In the chart above, the two candles surrounded by a blue rectangle are called a bullish homing dove pattern. You can see that ICICI BANK was in a downtrend and reversed after the homing pigeon pattern was formed.

The entry for that transaction was Rs. 296.15 and the stop loss was Rs. 285

Example 2 – A bullish homing dove pattern forming on a retracement during an uptrend.

In the chart above, the formation of two candles inside the blue rectangle is a bullish homing dove pattern. Here we can observe that when the STATE BANK OF INDIA stock is in an uptrend, a homing dove pattern is formed on the retracement and the price rises exactly from there.

The entry for this transaction was Rs. 530.15 and the stop loss was Rs. 520.00.

conclusion

In this article, we understood what the formation of a bullish homing dove pattern means, how traders can analyze it and how to trade it. In conclusion, you should remember that candlestick patterns are always paired with other indicators and you should check for trend reversals before placing a trade.

Markets are always unpredictable and may move against indications or analysis. Therefore, traders should always set a stop loss to minimize losses in such scenarios. What are your views on this pattern? Let us know in the comments below.

Written by Praneeth Kadagi

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