DEFINITION of 'Bullish Abandoned Baby'

A type of candlestick pattern that is used by traders to signal a reversal in the current trend. This pattern is formed by three distinct candlesticks that show the following characteristics:

1. The first bar is a large red candlestick located within a defined downtrend.
2. The second bar is a doji candle (open equal to the close) that gaps below the close of the first bar.
3. The last bar is a large white candle that opens above the second bar and is used to show the change in trader sentiment.

As you can see from the chart below, the pattern is a charting signal that the downtrend is about to reverse.

bullish_abandoned_baby.gif

BREAKING DOWN 'Bullish Abandoned Baby'

The bullish abandoned baby is a rare, but reliable, candlestick pattern that is useful in determining changes to a dominant downtrend. The accuracy of the reversal signal is greatly improved when it is used in conjunction with other technical indicators such as the MACD and RSI to confirm the reversal.

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