The bullish abandoned baby resembles the morning doji star and also consists of three candlesticks:
- A long black candlestick.
- A doji that gaps below the low of the previous candlestick.
- A long white candlestick that gaps above the high of the doji.
The main difference between the morning doji star and the bullish abandoned baby is the gaps on either side of the Doji. The first gap down signals that selling pressure remains strong. However, selling pressure eases, and the security closes at or near the open, creating a doji. Following the doji, the gap up and long white candlestick indicate strong buying pressure, and the reversal is complete. Further bullish confirmation is not required.
In April, Genzyme (GENZ) declined below its 20-day EMA and began to find support in the low thirties (see chart below). The stock began forming a base as early as April 17, but a discernible reversal pattern failed to emerge until the end of May. The bullish abandoned baby formed with a long black candlestick, doji, and long white candlestick. The gaps on either side of the doji reinforced the bullish reversal.
The bullish abandoned baby was the reversal pattern that indicated the trend reversal.
Read more: Chart Patterns
