BULLISH HOMING PIGEON
Definition
This pattern consists of a small black candlestick within a preceding relatively long black candlestick. It resembles the Harami pattern, except that both candlesticks are black.
Recognition Criteria
1. The market is currently defined by a dominant downward trend.
2. On the first day, a black candlestick is observed.
3. On the second day, we again see a black body which is completely engulfed by the body of the first day.
Pattern Requirements and Flexibility
The Bullish Homing Pigeon pattern features two black candlesticks. On the second day, we again see a black body completely engulfed by the body of the first day. The first one has to be a normal or long black candlestick. Either the body tops or the body bottoms of the two candlesticks may be at the same level, but the body of the second day should be smaller than the first.
Trader’s Behavior
This pattern signifies a disparity in market sentiment. In a market characterized by a downtrend, heavy selling is reflected by the black candlestick on the first day. However, the appearance of a smaller black candlestick on the second day indicates diminished power and enthusiasm among sellers, suggesting a potential trend reversal.
Buy/Stop-Loss Levels
The confirmation level is defined as the last close or the midpoint of the previous black body, whichever is higher. Prices should cross above this level for confirmation.
The stop-loss level is set at the lower of the last two lows. After a BUY signal, the stop-loss is triggered if prices decline instead of rising and either close below the stop-loss level or record two consecutive daily lows below it, without any bearish pattern being detected.