Bulkowski’s Bearish Abandoned Baby

Written and copyright © 2008-2010 by Thomas N. Bulkowski. All rights reserved.

In my book, Encyclopedia of Candlestick Charts, pictured on the right, I explore the entire range of candlestick patterns from abandoned babies to windows (not exactly A to Z, but you get the idea), in both bull and bear markets, using almost 5 million candle lines in the tests.

The book takes an in-depth look at 103 candlestick patterns and reports on behavior and rank (3 types: reversal rate, frequency, and overall performance), identification guidelines, performance statistics (tables of general statistics, height, and volume), trading tactics (tables of statistics on reversal rates and performance indicators), and wraps each chapter with a sample trade. I share a sliver of that information below. If you like what you read here, then you will love the book. Help support this website and buy a copy by clicking on the above link.

The bearish abandoned baby candlestick is an interesting name for a candle pattern. It acts as a bearish reversal often, but the price trend after the breakout is weak. Do not expect the trend to last long or be a strong one. The candle does best after an upward breakout, but is very weak after a downward one. Due to the number of identification guidelines associated with the bearish abandoned baby, this is a rare candle pattern, ranking 96th out of 103 candle types where 1 is "grains of sand on a beach" popular.

Important Results

Theoretical performance: Bearish reversal Tested performance: Bearish reversal 69% of the time Frequency rank: 96 Overall performance rank: 64 Best percentage meeting price target: 57% (bull market, up breakout) Best average move in 10 days: 5.34% (bear market, up breakout) Best 10-day performance rank: 24 (bear market, up breakout) All ranks are out of 103 candlestick patterns with the top performer ranking 1. "Best" means the highest rated of the four combinations of bull/bear market, up/down breakouts.

Bearish Abandoned Baby

Discussion

First, let me say that this is a rare candle, so some of the statistics use fewer than 20 samples (anything listed in a bear market).

The bearish abandoned baby works as a bearish reversal both in theory and in reality. Testing showed that it is a bearish reversal 69% of the time, ranking 14th, which is quite high. The overall performance rank is 64, which is lousy to be blunt. The reason for this is the mediocre move after a downward breakout. Those are the ones you will want to avoid.

The best average move 10 days after the breakout is a rise of 5.34%, ranking 24th. I consider moves above 6% as good ones, so this comes close, but it also uses numbers from a bear market, so the results are likely to change, perhaps substantially.

Identification Guidelines

Three Trading Tidbits

If you want a few bones from my Encyclopedia of candlestick charts book, here are three to chew on. The pages refer to the book where the tips appear.

1. Bearish abandoned baby candles that appear within a third of the yearly low perform best when the breakout direction aligns with the prevailing price trend (bull market/up breakout and bear market/down breakout) -- page 72-73.
2. Select tall candles in a bull market for the best performance -- page 73.
3. Look for a downward breakout in a bull market -- page 76.

Example

Shown is a bearish abandoned baby candlestick circled in red on the daily chart. The first candle is white and it appears in an upward price trend. Clearly I do not see an uptrend in the days before the candle begins, but overlook that, please. Finding good examples of this candlestick is a difficult task. In my defense, the black candle before the beginning of the bearish abandoned baby has a lower close, so I consider that the beginning of an upward price trend.

Candle height is not important. The second day is the doji, so called because the opening and closing prices are within pennies of each other, leaving almost no body visible except a thin line. The doji gaps above the adjacent candles. The last day in the bearish abandoned baby is a black candle. Height is not important on this one either, just as long as any upper shadow remains below the doji’s low price.

This bearish abandoned baby functions as a reversal or continuation pattern, depending on how you define the incoming price trend. The breakout is downward and price makes a long lower shadow the next day, finding support at the green line.

-- Thomas Bulkowski