BEARISH ABANDONED BABY
Definition
This three-candlestick pattern signals a major top reversal. It is similar to the Bearish Evening Doji Star but with one key difference: the shadows on the Doji must also gap above the shadows of the first and third days. The pattern’s name originates from the second day, where the Doji appears to float alone on the chart like an abandoned baby between the first and third days. Essentially, the pattern consists of a white candlestick followed by a Doji that gaps away (including shadows) from the previous white candlestick and the subsequent black candlestick, which closes well within the first candlestick’s real body.
Recognition Criteria
1. The market is currently characterized by a strong upward trend.
2. A white candlestick is observed on the first day.
3. On the second day, a Doji appears with its shadows gapping above the previous day’s upper shadow.
4. On the third day, a black candlestick gaps in the opposite direction, with no overlapping shadows.
Pattern Requirements and Flexibility
The Bearish Abandoned Baby pattern starts with a white candlestick that is not short, followed by a Doji with a gap away from the prior candlestick, including shadows. On the third day, a black candlestick appears. The gap between the high of this candlestick and the low of the Doji can be null. The bearish candlestick must close well within the real body of the initial bullish candlestick. The degree, to which the third candlestick must close lower, is determined by the other candlesticks in the pattern. The third day’s closing should reach the midpoint between the first day’s opening and the second day’s highest body level.
Trader’s Behavior
A white candlestick confirms the continuation of the ongoing uptrend. The presence of the Doji, accompanied by a significant gap, indicates that bulls are still driving the price higher. However, the tight price action between the open and close signals indecision and a weakening of the prior trend. On the third day, prices gap lower at the open and then close significantly lower, indicating that bears have taken control of the market.
Sell/Stop-Loss Levels
The confirmation level is determined by the last close. For confirmation, prices should fall below this level.
The stop-loss level is defined as the higher of the last two highs. Following the bearish signal, if prices rise instead of falling and either close above or make two consecutive daily highs above the stop-loss level, without detecting any bullish pattern, the stop-loss is triggered.