Candlestick patterns are a great way for traders and investors to analyze and predict the future price movements of an asset. Studying candlestick patterns can also help identify trend reversals or continuations. The abandoned baby pattern is one such candlestick pattern that can help identify trend reversals.
The abandoned baby candlestick pattern is a three-candlestick pattern that can help traders identify reversals in trends. The pattern can be seen as a bullish as well as a bearish signal and can prove to be a reliable indicator for significant changes in the price trajectory. The three-candlestick pattern is similar to the morning star and evening star candlestick patterns but can be easily differentiated by certain features.
Being a reversal candlestick pattern, the abandoned baby chart pattern is usually seen at the end of an uptrend or downtrend. However, the pattern is rare due to the specific price movement criteria that must be met to complete the pattern.
Check Here to know How to Read Candlestick Charts.
The abandoned baby pattern is a three-candle pattern which means the pattern is only confirmed after the third candle is completely formed. Since the pattern is a reversal pattern, it is found usually at the end of a trend and the successful completion of the pattern indicates a reversal in the trend.
Here are the three candles that make up the abandoned baby chart pattern:
The second candlestick is a doji, which closes near its opening price, resulting in a small body. For the abandoned pattern to be confirmed, there should be no overlapping between the first and the second candlesticks, and the second and third candlesticks. As a result, the small doji candle resembles an abandoned baby.
The abandoned baby pattern can be a bullish abandoned baby pattern or a bearish abandoned baby pattern. The nature of the pattern depends on the primary trend of the price.
A bullish abandoned baby pattern occurs towards the end of a downtrend signifying a reversal.
The bearish abandoned baby pattern occurs towards the end of an upmove.
The key difference between the abandoned baby chart pattern and the morning or evening star chart pattern is that the first and third candles do not overlap with the second candle in the abandoned baby. Meanwhile, the evening or morning star does not require the second candlestick to be a doji or to open with a gap.
However, in some cases, traders make an exception to the abandoned baby candlestick pattern which validates the pattern even if the second candle does not open at a gap.
The abandoned baby chart pattern is important for the following reasons:
The abandoned baby pattern signifies a sudden change in the momentum and direction of the market. The pattern indicates that certain factors have resulted in a sudden reversal in the prevailing trend. The second candlestick in the pattern is a doji candlestick which is an indicator of indecisiveness. When the market is indecisive, a push or pull in either direction can result in significant price changes.
In the case of an uptrend, the formation of a bearish abandoned baby might lead to panic among the bulls who might decide to book profits while bears enter the market pushing the price down further. Similarly, in the case of a bullish abandoned baby, short sellers might be forced to cover their positions which would push the price up further as the number of buyers increase.
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Bullish Pattern |
Features |
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A reversal pattern which consists of: - A small bearish candle followed by a - Larger bullish candle. |
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A reversal pattern which consists of: - A small body candle, and - Long lower shadow/wick |
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A reversal pattern which consists of: - It starts with a long bearish candle - Followed by a small-bodied candle (either bullish or bearish) - And ends with a long bullish candle. |
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- A strong bearish candle followed by a bullish candle. - Second candle opens below the previous candle's close but closes above the midpoint (50%) of the previous bearish candle. |
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- It is is a two-candlestick pattern that signals a possible upward trend reversal. - Small bullish candle is completely contained within the body of the previous large bearish candle. |
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- It consists of three long bullish candles with small wicks that appear consecutively one after another. - Each new candle opens inside the previous one’s body and closes higher than the last. |
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A reversal pattern which: - Appears at the bottom of a downtrend - A small body with a long upper shadow and little to no lower shadow. |
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A reversal pattern which consists of: - A single candlestick pattern - A very small body and a long lower shadow that appears at the bottom of a downtrend |
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A three candlestick pattern with: - A large bearish candle, - A small bullish candle that closes above the 50% level of the first candle and - A third bullish candle that closes above the first candle's open. |
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Starts with a bearish candle - Followed by a bullish candle that engulfs the first candle - Ends with another bullish candle that closes higher. |
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- Starts with a long bearish candle - Followed by an even longer bullish candlestick. The candle opens higher than the previous day's closing price and rises even more. |
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A two-candlestick pattern that includes: - Two equal-sized bullish and bearish candles. |
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It consists of five candles in a continuation pattern - A long bullish candle - Three small bearish candles that trade above the low and below the high of the first candlestick - And another long bullish candle that closes above the high of the first candlestick. |
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It is similar to the rising three methods pattern consisting of five candles - It starts with a long bullish candle - Followed by three small bearish candles (a smaller bearish candles that move lower) that stay within the range of the first candle - And end with another long bullish candle that closes above the high of the first candle. |
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Bearish Pattern |
Features |
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It forms when a small bullish candle is followed by a large bearish candle that completely engulfs the previous green candle |
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It is formed when three consecutive long-red candles with small wicks are visible |
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It appears at the top of the uptrend as a single candle with a small body and a long lower shadow |
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It is a three-candlestick pattern that - Starts with a long bullish candle - Followed by a small-bodied candle that gaps up - And ends with a long bearish candle that closes well into the body of the first candle |
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It is a reversal strategy which: - Is a single candlestick pattern with a small body, a long upper shadow, and little to no lower shadow |
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It is a two-candlestick pattern that: - Starts with a long bullish candle followed by a Doji (a candle with a very small body) |
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It is a two-candlestick pattern where: - A small bearish candle is completely engulfed within the body of the previous large bullish candle |
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- It consists of two or more candles with matching highs and appears at the top of an uptrend. - The first candle is usually bullish - And the second candle is bearish |
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- It starts with a long bullish candle - Followed by a long bearish candle that opens below the previous candle’s opening price and closes lower |
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It is a three-candlestick pattern that: - Starts with a bullish candle - Followed by a smaller bearish candle that is completely within the first candle - And ends with another bearish candle that closes lower |
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It is a three-candlestick pattern that - Starts with a bullish candle - Followed by a bearish candle that engulfs the first candle - And ends with another bearish candle that closes lower |
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it is a five-candlestick pattern that: - Starts with a long bearish candle - Followed by three smaller bullish candles that stay within the range of the first candle - And ends with another long bearish candle that closes below the first candle |
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It forms a long green candle followed by a red candle that opens above the previous high but closes below the midpoint of the green candle. |