The Bullish Abandoned Baby is a rare three-candlestick bullish reversal pattern that forms at the bottom of a downtrend, signalling a potential trend reversal. The pattern consists of a long bearish candle, followed by a Doji that gaps down, and then a strong bullish candle that gaps up, leaving the Doji “abandoned” with no price overlap.
Characteristics
- Appears after a prolonged downtrend, signalling a possible trend reversal.
- First candle: A large bearish candle, continuing the downtrend.
- Second candle: A Doji that gaps down, showing extreme indecision.
- Third candle: A strong bullish candle that gaps up, closing above the midpoint of the first candle.
- The lack of price overlap (gap) makes this pattern highly reliable.
Market Psychology
- First Candle: Sellers maintain strong control, pushing prices lower.
- Second Candle (Doji): Market uncertainty emerges, and sellers fail to push lower.
- Third Candle: Buyers take control, gapping up and closing higher, confirming a shift in momentum.
Confirmation & Limitations
- The third candle closing above the first candle’s midpoint confirms the reversal.
- More reliable when forming at strong support levels or after extreme oversold conditions.
- Stronger when RSI rebounds from oversold conditions or MACD signals a bullish crossover.
- Rare occurrence, making it difficult to spot frequently.