Bullish Homing Pigeon
What Is the Bullish Homing Pigeon?
The bullish homing pigeon is a candlestick pattern where one large candle is followed by a more modest candle with a body situated inside the scope of the larger candle's body. The two candles in the pattern must be black, or filled, demonstrating that the closing price was lower than the opening price.
This pattern might show that there is a debilitating of the current descending trend, which improves the probability of a vertical reversal.
Figuring out the Bullish Homing Pigeon
Bullish homing pigeons are bullish reversal patterns, albeit some research has suggested that it's a more accurate bearish continuation pattern. This is on the grounds that prices don't move in straight lines. During a downtrend, the price drops, then stops or pulls back, and afterward proceeds lower once more. The bullish homing pigeon could just be a respite before the price proceeds with lower.
When used to predict a bullish reversal, traders watch for the pattern to happen during a downtrend that is debilitating or approaching a support level. As of now, they might think about leaving short positions or entering long positions. The pattern is less significant as a bullish reversal when it happens in choppy market conditions.
This candlestick pattern is like a inside day, where a candlestick's whole price range falls inside the price scope of a previous day. The two patterns are used similarly. The difference is bullish homing pigeons just gander at the open and closing price as opposed to the whole daily range.
Bullish Homing Pigeon Confirmation
Whether involving the pattern as a reversal or continuation signal, numerous traders sit tight for the next candle for confirmation of the course. On the off chance that the price moves over the open of the first or second candle, and particularly assuming it closes there, the vertical thrust gives evidence that a bullish reversal is in progress. Assuming the next candle after the pattern sees the price drop, and particularly assuming it closes below the close of the first or second candle, that selling demonstrates the price is bound to drop.
Likewise with most candlestick patterns, bullish homing pigeons work best when utilized related to other technical indicators or chart patterns. These chart patterns can act as confirmation of a bullish reversal. For instance, on the off chance that the price has been running, a bullish homing pigeon might be a valuable pattern to look for close to support. Both the reach and homing pigeon pattern demonstrate that the price could head higher off support.
The pattern is likewise valuable for signaling the finish of a pullback during an uptrend. The pullback is a short-term price drop inside the overall uptrend. In the event that a bullish homing pigeon happens during a pullback and, is followed by price movement to the upside, that could signal the pullback is finished and the vertical price direction is continuing.
Stop Loss and Price Targets
After the pattern happens, in the event that the price moves higher this demonstrates a bullish reversal. A trader could enter a long position and place a stop loss below the low of the pattern. On the other hand, they could place it below the low of the subsequent candle, which will frequently be higher than the main candle (however not consistently).
In the event that a trader chooses to utilize the pattern to signal the continuation of a downtrend, they will trust that the price will move lower after the pattern forms. They could then enter a short position with a stop loss over the high of the pattern. On the other hand, they could place the stop loss over the high of the subsequent candle.
The bullish homing pigeon, as most candlestick patterns, doesn't give a price target. The price might begin another all out trend after the pattern, or the price may barely move by any means. A trader could use a price target in view of a defined risk/reward, a measured move, or they could use a trailing stop.
Illustration of a Bullish Homing Pigeon
A bullish homing pigeon candlestick pattern appeared in Meta's, formerly Facebook, (META) stock. The stock was heading higher, however at that point entered a pullback phase. The price moved lower and afterward a bullish homing pigeon pattern arose.
The pattern was followed by a gap higher and strong rise the following day. This sharp rise following the pattern gave confirmation that the pullback was finished. Due to the gap higher, this trade would have had a large stop loss in the event that it was placed below the low of the pattern. For certain traders, this might have invalidated the trade. Others might have found somewhere else to put the stop loss.
The pattern doesn't give a profit target, and there are no confirmations of how far the price will run after the pattern happens. In this case, the price moved higher for three days following the confirmation candle before moving lower once more.
Highlights
- This candlestick pattern happens during downtrends, or during pullbacks inside an uptrend.
- It is made out of a large real body followed by a more modest real body, and the two candles are black (filled) or red demonstrating the close is below the open.
- A bullish homing pigeon is an upside reversal pattern, in spite of the fact that it can likewise be a bearish continuation pattern.
- Bullish homing pigeon patterns don't give profit targets, and a stop loss is commonly placed below the lower part of the pattern after an upside move is confirmed.
