Bearish Abandoned Baby Candlestick – Strong Reversal Pattern

When a strong uptrend starts losing momentum, traders look for signals that indicate a potential trend reversal. One of the most reliable bearish candlestick patterns for this purpose is the Bearish Abandoned Baby. It warns that buying pressure has faded and sellers are taking control.

This pattern often appears after a prolonged uptrend and suggests a reversal of a bullish trend. While the abandoned baby is a rare pattern, it holds significant weight when it shows up. The abandoned baby is a type of candlestick pattern that indicates a reversal in a currently upward trend. Let’s break down how it works, what it tells us about the market, and how traders can use it effectively while managing risk.

The Bearish Abandoned Baby is a type of candlestick pattern consisting of three candles and signaling a shift from bullish to bearish sentiment. It features:

1. Body of the first candle: A strong bullish candle that continues the existing uptrend.
2. Second candle: A Doji candlestick, which indicates a potential reversal, gapping up from the previous candlestick, which is a tall white candle.
3. Third candle: A large bearish signal, closing below the midpoint of the first bullish candle.

This candlestick pattern that appears when buyers lose strength and sellers step in forcefully, leading to a potential downtrend. The key element of this setup is the gap on both sides of the Doji candlestick, emphasizing the sudden market sentiment from bullish to bearish.

The Bearish Abandoned Baby candlestick pattern is illustrated below.

The formation of the Bearish Abandoned Baby has distinct features that make it stand out among other technical indicators or chart patterns:

• Pattern occurs at the end of an uptrend, signaling a potential trend reversal.
• Pattern suggests a bearish reversal of a bullish trend.
• Consists of three candles: a large bullish candle, a Doji candlestick, and a large bearish signal candle.
• The previous candlestick is a tall white candle, indicating strong buying pressure.
• The tall white candlestick with small wicks shows a decisive uptrend before hesitation.
• The gaps between the candles highlight the sudden shift in market sentiment from bullish to bearish.
• Pattern to be confirmed by higher trading volume during the third candle.

The formation of a Bearish Abandoned Baby candle reflects a clear transition in trading psychology.

1. The candlestick pattern consisting of three candles begins with a strong bullish candle, showing continued buying pressure.
2. The Doji candle becomes an important signal, reflecting uncertainty and hesitation as buyers and sellers reach equilibrium.
3. The candle and the subsequent bearish candle gap down and close lower, confirming a signal for a downward reversal.

This reversal of a bullish trend highlights how the abandoned baby pattern forms when buyers lose control and sellers take over.

While the Bearish Abandoned Baby indicates a potential trend reversal to the downside, the Bullish Abandoned Baby pattern suggests the opposite. Abandoned baby is also used to describe the bullish counterpart, where the pattern signals an upward reversal.

In the Bullish Abandoned Baby pattern, a candlestick chart displays:

1. A large bearish candle in a downtrend.
2. A second candle as a Doji, gapping down from the first candle.
3. A third candle that gaps up and closes above the midpoint of the first bearish candle, confirming a bullish reversal.

Understanding both bullish and bearish abandoned baby patterns can help traders identify reversals in either direction.

Using the Bearish Abandoned Baby effectively requires understanding its context within the broader trend. Traders identify an Abandoned Baby pattern in strong uptrends, especially near key resistance levels. Here’s how to approach it:

• Market conditions: The pattern is most effective in strong uptrends.
• Volatility considerations: In high-volatility markets, gaps may be larger, increasing the risk of false signals.
• Confirmation of the Bearish Abandoned Baby, including the Bearish Abandoned Baby pattern itself, requires higher volume and follow-through price action.

To trade the Abandoned Baby effectively, proper risk management is crucial:

• Stop-loss placement: Set a stop-loss above the high of the Doji candlestick to protect against false breakouts.
• Entry strategy: Enter short after the third candle confirms the reversal.
• Profit target: Aim for previous support levels or a risk-reward ratio (e.g., 2:1).
• Use the abandoned baby candle to limit potential losses and maximize returns.

To trade the Abandoned Baby effectively, proper risk management is crucial:

• Stop-loss placement: Set a stop-loss above the high of the Doji candlestick to protect against false breakouts.
• Entry strategy: Enter short after the third candle confirms the reversal.
• Profit target: Aim for previous support levels or a risk-reward ratio (e.g., 2:1).
• Use the abandoned baby candle to limit potential losses and maximize returns.

To trade the Bearish Abandoned Baby pattern systematically:

1. Identify a strong uptrend before the abandoned baby chart pattern appears.
2. Spot a large bullish candle, a Doji candlestick, and a final tall red candlestick with gaps.
3. Confirm the formation of the Bearish Abandoned Baby with volume.
4. Enter short if the subsequent bearish candle closes below the first candle’s midpoint.
5. Backtest the pattern in different market conditions, leveraging pattern recognition skills to improve accuracy.

Below is an AFL script to detect the Bearish Abandoned Baby candlestick pattern in Amibroker:

This script helps traders seeking to identify a bearish reversal using the Bearish Abandoned Baby pattern.

The Bearish Abandoned Baby is a type of candlestick pattern that signals a downward reversal trend from an uptrend to a downtrend. This pattern in technical analysis helps traders identify a bearish reversal by highlighting bearish sentiment after a bullish trend.

To trade the Abandoned Baby pattern, ensure confirmation through volume and follow-through price action. Understanding the Abandoned Baby pattern, along with its bullish and bearish variations, and backtesting it across different markets can enhance trading strategies and improve results.

Links to articles about other Candlestick Patterns

1. Doji
2. Hammer
3. Inverted Hammer
4. Bullish Engulfing
5. Bearish Engulfing
6. Morning Star
7. Evening Star
8. Shooting Star
9. Hanging Man
10. Piercing Pattern
11. Dark Cloud Cover
12. Three White Soldiers
13. Three Black Crows
14. Dragonfly Doji
15. Gravestone Doji
16. Spinning Top
17. Marubozu
18. Tweezer Top
19. Tweezer Bottom
20. Bullish Harami 
21. Bearish Harami
22. Rising Three Methods
23. Falling Three Methods
24. Bullish Abandoned Baby 
25. Bearish Abandoned Baby 
26. Bullish Kicker 
27. Bearish Kicker
28. Three Inside Up
29. Three Inside Down
30. Upside Gap Two Crows
31. Mat Hold
32. Upside Tasuki Gap
33. Downside Tasuki Gap