Also called a BULLISH HOMING PIGEON if the trend is down
Bullish Homing Pigeon Pattern is a small black real body contained by a prior relatively long black real body.
Recognition Criteria:
1. Market is in downtrend.
2. We see a black body in the first day.
3. Then we again see a black body in the second day where the real body of this second day is completely engulfed by the real body of the first day. It is not required that the shadows (high/low) of the second candlestick are contained within the first, though it's preferable if they are.
Explanation:
The Bullish Homing Pigeon Pattern is a signal of disparity. In a market characterized by downtrend, we first see heavy selling reflected by the long, black real body of the first day. However small body of second day points out to diminished power and enthusiasm of the sellers thus suggesting a trend reversal.
Important Factors:
The important fact about this pattern is the requirement that the second day has a minute real body relative to the prior candlestick and that this small body is completely contained by the larger one. The Bullish Homing Pigeon Pattern is not necessarily a signal for a rally. Market usually has a tendency to enter into a congestion phase following a Homing Pigeon.
We must check the third day to confirm that the downtrend has reversed. This confirmation may be in the form of a white candlestick, a large gap up or a higher close on the next trading day (on the third day).
In an uptrend it called a BEARISH HARAMI
Bearish Harami Pattern is a two-candlestick pattern composed of a small black real body contained within a prior relatively long white real body. “Harami” is an old Japanese word for “pregnant”. The long white candlestick is “the mother” and the small candlestick is “the baby”.
Recognition Criteria:
1. Market is characterized by an uptrend.
2. We see a long white candlestick on the first day.
3. Then we see a black candlestick on the second day whose real body is completely engulfed by the real body of the first day. The shadows (high/low) of the second candlestick do not have to be contained within the first body, though it's preferable if they are.
Explanation:
The Bearish Harami Pattern is a sign of a disparity about the market’s health. Bull market continues further confirmed by the long white real body’s vitality but then we see the small black real body which shows some uncertainty. This shows the bulls’ upward drive has weakened and now a trend reversal is possible.
Important Factors:
It is important that the second day black candlestick has a minute real body relative to the prior candlestick and that this small body is inside the larger one. The Bearish Harami Pattern does not necessarily mean a market reversal. It rather predicts that the market may not continue with its previous uptrend. There are however some instances in which the Bearish Harami Pattern can warn of a significant trend change - especially at market tops.
A confirmation of the reversal on the third day is required to be sure that the uptrend has reversed. This confirmation may be in the form of a black candlestick, a large gap down or a lower close on the next trading day (the third day).
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