Bearish Abandoned Baby
A bearish abandoned baby is a specialized candlestick pattern consisting of three candles, one with rising prices, a second with holding prices, and a third with falling prices.  Image by Sabrina Jiang © Investopedia 2021 When this pattern occurs, price trends lower over the next 20 days about 65 percent of the time, with a median return of -3.00%, while the return for the benchmark S&P 500 index was positive for the same days. In contrast to the rare bearish abandoned baby pattern, the equally rare bullish abandoned baby pattern, with a similar price structure, forecasts a bullish trend following its appearance.  Image by Sabrina Jiang © Investopedia 2021 Identifying both bearish and bullish abandoned baby patterns is done by recognizing the three main characteristics that make up these patterns: first, a prevailing trend; second, the proper sequence of candles; third, two gaps in price, the first one after the first candle and the second gap after the second candle. White candlestick: A bearish abandoned baby is a specialized candlestick pattern consisting of three candles, one with rising prices, a second with holding prices, and a third with falling prices. Both the bearish abandoned baby and the bullish abandoned baby are similar to the evening star and morning star formations.
What Is Bearish Abandoned Baby?
A bearish abandoned baby is a specialized candlestick pattern consisting of three candles, one with rising prices, a second with holding prices, and a third with falling prices. Technical analysts expect that this pattern signals at least a short-term reversal in a currently upward trending price. The occurrence of this pattern is quite rare appearing approximately 50 times over the past two decades on S&P 500 stocks. The signal is usually followed by bearish performance over the short term.
Understanding Bearish Abandoned Babies
A bearish abandoned baby can be a signal for a downward reversal trend in the price of a security. This pattern is formed when a doji-like candle is preceded by a gap between its lowest price and that of the previous candlestick. The previous candlestick is a tall white candlestick with small shadows. The doji is also followed by a gap between its lowest price and the highest price of the next candle. The next candlestick is a tall red candlestick with small shadows. In this pattern, the doji candle becomes an important signal for traders and technical analysts seeking to identify a bearish reversal of a bullish trend.
Image by Sabrina Jiang © Investopedia 2021
When this pattern occurs, price trends lower over the next 20 days about 65 percent of the time, with a median return of -3.00%, while the return for the benchmark S&P 500 index was positive for the same days.
In contrast to the rare bearish abandoned baby pattern, the equally rare bullish abandoned baby pattern, with a similar price structure, forecasts a bullish trend following its appearance.
Image by Sabrina Jiang © Investopedia 2021
Identifying both bearish and bullish abandoned baby patterns is done by recognizing the three main characteristics that make up these patterns: first, a prevailing trend; second, the proper sequence of candles; third, two gaps in price, the first one after the first candle and the second gap after the second candle.
Similar Patterns to Bearish Abandoned Baby
Both the bearish abandoned baby and the bullish abandoned baby are similar to the evening star and morning star formations. The difference that makes the abandoned baby patterns so rare is the occurrence of the doji candle with a gap on either side. The evening star and morning star formations do not require the middle candle to be a doji, or to have gaps on either side.
The name for this pattern, like many of the names of candlestick patterns, comes from a traditional usage among rice traders in Japan. Steve Nison is credited with first publishing this name in the popular press in 1991, though the name has been around in Japanese trading for centuries. This pattern is also similar to the bar-chart pattern known as an island reversal but with only a single candle.
Related terms:
Bullish Abandoned Baby
The bullish abandoned baby is a type of candlestick pattern used by traders to signal a reversal of a downtrend. It is rare but can be powerful. read more
Bullish Belt Hold
A bullish belt hold is a single bar Japanese candlestick pattern that suggests a possible reversal of the prevailing downtrend. read more
Candlestick
A candlestick is a type of price chart that displays the high, low, open, and closing prices of a security for a specific period and originated from Japan. read more
Doji : What Is a Doji Candle Pattern?
A doji is a name for a session in which the candlestick for a security has an open and close that are virtually equal and are often components in patterns read more
Evening Star
An evening star is a stock-price chart pattern used by technical analysts to detect when a trend is about to reverse. read more
Hammer Candlestick
A hammer is a candlestick pattern that indicates a price decline is potentially over and an upward price move is forthcoming. read more
Island Reversal
An island reversal is a candlestick pattern that can help to provide an indication of a reversal. read more
Morning Star & Example
A morning star is a bullish candlestick pattern in a price chart. It consists of three candles and is generally seen as a sign of a potential recovery following a downtrend. read more
Piercing Pattern
The piercing pattern is a two-day candle pattern that implies a potential reversal from a downward trend to an upward trend. read more
Red Candlestick
A red candlestick is a type of price chart indicating that the closing price of a security is lower than both the open and prior close. read more