Abandoned Baby

The Abandoned Baby is a rare candlestick pattern used in technical analysis of stocks, cryptocurrencies, and other financial markets. It is typically interpreted as a reversal signal and can appear in both bullish and bearish scenarios.

Bullish Abandoned Baby

This pattern occurs in a downtrend and suggests a possible reversal to the upside. It consists of three candles:

• The first candle is a long red (or black) candlestick in a prevailing downtrend.

• The second candle is a Doji (a candle where the opening and closing prices for the period are the same, or very close to the same) that gaps below the close of the previous candle.

• The third candle is a green (or white) candlestick that gaps above the Doji.

The "baby" in this pattern is the Doji candlestick, which is separated or "abandoned" from the rest of the price action. The gap between the Doji and the other two candles is what makes the pattern significant.

Bearish Abandoned Baby

This pattern occurs in an uptrend and signals a possible reversal to the downside. It consists of three candles:

• The first candle is a long green (or white) candlestick in a prevailing uptrend.

• The second candle is a Doji that gaps above the close of the previous candle.

• The third candle is a red (or black) candlestick that gaps below the Doji.

Just like in the bullish version, the Doji is the "baby" that is separated or "abandoned" from the rest of the price action. The bearish version is considered a strong signal of an impending downturn.

These patterns are not common, but they are considered highly reliable. Traders should use them in conjunction with other forms of technical analysis to increase their effectiveness.