Since candlesticks are the basic building block of most technical analysis, the ability to recognize different candlestick patterns is a crucial trading skill.
First though, let’s start with a definition.
What Is a Bearish Abandoned Baby Pattern?
A bearish abandoned baby pattern is a 3-candlestick formation that may signal a bearish reversal. It may appear during an uptrend and is made up of a large bullish candle, a doji that gaps up, and a large bearish candle that gaps down.
It is a subtype of the abandoned baby and the opposite of the bullish abandoned baby. It is also very similar to the evening star and evening doji star patterns. For all of these patterns, the middle candle is essentially the apex of a potential reversal.
Of course, no candlestick pattern guarantees a particular outcome. Instead, they offer clues as to what is going on in the market.
So the question is, what does an abandoned baby really tell you?
What Bearish Abandoned Baby Patterns Mean
Like many candlestick patterns, the name itself doesn’t reveal much.
And unlike some, English speakers do not use the Japanese name for it. The term “abandoned baby” probably comes from how it looks. The long candles are the parents, the doji is the baby, and the gaps signify abandonment.
In trading terms:
- During the first period, the price continued the pre-existing uptrend.
- The second period opened with a gap up, after which neither the bulls nor the bears were able to maintain control.
- The third period opened with a gap back down and continued decreasing, threatening the pre-existing uptrend.
This sets the stage for bearish reversal, as it appears the uptrend may be nearing exhaustion.
How To Recognize Bearish Abandoned Baby Candlestick Patterns
Traders are attracted to patterns partly because they are easy to spot.
However, it’s also easy to see things on the charts that aren’t truly there (or anticipate events that never come to fruition). That’s one of the reasons why waiting for confirmation is so important.
Technically, a bearish abandoned baby pattern must:
- Appear during an uptrend
- Begin with a bullish long candle
- Have a doji as the second candle
- Have gaps before and after the doji
- End with a bearish long candle of similar size to the first candle
In practicality though, many traders will make various exceptions.
- The first and third candles can be different lengths, as long as they are both long line candles and/or test important price levels.
- The second candle doesn’t necessarily have to be a doji, as long as it is a short line candle.
- The gaps can go, especially in markets where gaps are less common like cryptocurrency.
- There can be more than one doji (or short candle) between the first and final candlestick.
Depending on who you ask, any of these standards may be more or less important. Moreover, some of these variations may be more properly classified as other reversal candlestick patterns, such as the evening star or evening doji star.
Remember, identifying the reversal itself is more important than labeling the formation. That’s not to say these standards are completely unimportant (as we’ll touch on shortly). It’s just to say that the implications are more important than the criteria.
In other words, you need to put it into context.
Where Bearish Abandoned Babies Fit in the Chart Narrative
The markets are often characterized as a battle between the bulls and the bears.
Bearish abandoned baby patterns show that the bulls attempted to press their advantage on candle one, stalled on candle two, and finally surrendered momentum to the bears on candle three.
On the chart, it looks like a U-turn.
It might happen like this on a daily time frame:
On the first day, the bulls continued the uptrend by pushing price significantly higher. After the market closed, price continued drifting upward. As the next trading day began, the gap brought on indecision. After the market closed on the second day, some of the bulls began to take profits. This profit-taking continued throughout the third day, leading to a return to the open of the first day.
From here, the bulls lose confidence while the bears gain it.
In the short-term, it amounts to a bearish counterpunch.
The question traders need to ask themselves is, “Will the bears take over from here or was it just a hiccup in the greater trend?”
To answer that question, you’ll need more than just an understanding of Japanese candlesticks and candlestick patterns. You’ll want to analyze both within the context of greater chart patterns as well as trend and price levels. You’ll also want to make use of your own chart markup and indicators.
Analyze the history of your preferred asset(s) with respect to bearish abandoned baby patterns and apply it to your own trading style.
Now, you can test (and/or stretch) the criteria we mentioned above to find the most tradeable opportunities. For example, you may find that abandoned babies with larger gaps play out more reliably than those with smaller ones. Or, you may find something else entirely.
Here is where the story in the charts begins to come into focus.
This is what we call technical analysis.
How To Trade Bearish Abandoned Baby Patterns
Bearish reversal points are great places to exit longs or enter shorts.
Bearish abandoned baby patterns serve as easy-to-spot signs of potential bearish reversal—and may even lead to longer-term tops when found on higher time frames.
Generally, you can put more weight into multi-stick patterns than single candles. They give you more information over a longer amount of time. Still, it is considered unwise to trade based on candlestick patterns alone. They rarely have extremely high hit rates by themselves.
You need additional points of confluence to shift the probabilities in your favor.
Some of the more important ones include:
- Volume – Reversals are often accompanied by elevated trading volume. For bearish abandoned babies, be on the lookout for it on the second and (especially) the third candles.
- Price Formations – Bearish abandoned babies that form near important resistance levels are usually more likely to lead to sustained reversals. They also reinforce the strength of such levels.
- Oscillator Shift – Oscillating indicators like the RSI or stochastics are commonly used to identify reversals by analyzing slope, percentile, and/or divergence.
The fewer such factors corroborating the reversal, the less confident you can be about it.
It would be difficult to form a comprehensive trading strategy around abandoned baby patterns (whether bullish or bearish). There simply isn’t enough there to develop a strong edge. Even with a great understanding of trading math, orders, psychology, risk management, options, and automation, you’d still have a hard time.
You’re much better off building your strategy around other tools then using reversal patterns as an additional point of confirmation.
Patterns like the abandoned baby are much better idea givers than trade makers.
Other Candlestick Pattern Types
The bearish abandoned baby is but one of many candlestick patterns.
You’d be wise to get familiar with all of the other ones too.
- Counterattack Line – Bearish/Bullish
- Doji Star – Evening/Morning
- Engulfing – Bearish/Bullish
- Harami – Bearish/Bullish
- Harami Cross – Bearish/Bullish
- In Neck – Bearish/Bullish
- Mat Hold – Bearish/Bullish
- On Neck – Bearish/Bullish
- Star – Evening/Morning
- Tasuki Gap – Downside/Upside
- Three Inside – Down/Up
- Three Methods – Falling/Rising
- Three Outside – Down/Up
- Tweezer – Top/Bottom
- Window – Falling/Rising
Sure, there are quite a few of them. But don’t let that intimidate you.
It’s unnecessary to memorize all the names and criteria for every pattern. What’s more important is to learn the principles of price action and technical analysis.
In fact, you’re free to forget all of the names and specifications as long as you can look at a group of candlesticks and understand what they are trying to tell you.
Takeaways
To review:
Bearish abandoned babies are a type of candlestick pattern that signals a potential bearish reversal. While not a guarantee, their appearance may indicate that market conditions are changing. Thus, they can help you find winning trades.
Of course, there are other candlestick patterns that you should learn about. And even so, the ability to recognize patterns is not enough to trade successfully on its own.
Nonetheless, you’ve now added one more tool to your toolkit.
Have questions or more information to add? Contribute to the conversation in the comments below! Or, if you know someone who could benefit from this post, share it with them. You can also check out our Candlestick Patterns Guide to improve your candlestick analysis skills.