In this video we're going to take a look at bullish and bearish abandoned baby patterns.
Now these are modified in forex because they need gaps like some of the other patterns that we've talked
about.
But they are powerful patterns so we don't want to ignore them obviously.
And what an abandoned baby is is much like a morning or evening star in the sense that it is a three
candlestick pattern and to be honest with you I've always kind of looked at him as the same.
So this is a bearish one.
You'd be in an uptrend here.
You'd have the baby the abandoned baby because there are gaps and in a downtrend you would have a bullish
abandoned baby because you would have the first candlestick would continue the downtrend then you would
have a gap lower and then you to have a turnaround and that would be obviously a very bullish sign because
the sellers just couldn't keep it up.
And that's essentially what you're looking for now in forex.
We have these Wicks that'll come into play and this is my example here of a bearish one because you
have the body of the candle.
You have the next body a little higher than you have the third party body much lower a break of the
third candle is a selling opportunity.
We go right to where you would expect support and then turn around.
So this isn't a trend changing pattern in this specific instance but it does show some weakness and
it does end up being a profitable trade.
Remember you always have to have an exit point when you place a trade was a one to one target.
So nice little counter trend trade.
If you take the week's out it is the same pattern.
We don't give the gap down below but unfortunately that's one of the adjustments we need to make.
So in that sense it's traded very much like an evening star would be in forex that we discussed earlier
because of the modifications necessary.
Now in this case you could make an argument for an abandoned baby in the bullish sense in the Swedish
krona because we were negative we ended up forming that little candle there and then we rallied.
And you can see that we rally a little bit.
And again this wasn't a complete trend reversal.
But this was a pullback so quite often you'll see that with these candlesticks in the modified for ex
version because you have to ignore the Whigs.
So what does that mean.
That doesn't have the same power as gaps do on a daily chart in a stock market for example.
So a lot of times it doesn't mean an impending trend change.
It just means so for example if you're short and you see this.
You may want to tighten your stops up.
That's another way to use it.
Sometimes when you see a pattern working against you then you know that once it gets fired and in this
case it would have been at the top of the third candlestick.
You have to be a little bit more concerned about your short position and the dollar against the Swedish
Corona.
For example there are a multitude of ways of using this information.
Remember that just because it's a bullish sign doesn't mean that you necessarily have to buy.
Sometimes it is an excuse to move your stops up something that you should always be aware of that the
market may move against you obviously.
These are a bit difficult to trade in forex without doing a little bit of research on modifications
but they do happen.
The main thing is basically you know you want to see some type of an attempt to go higher.
You want the body to be above this candlestick here and then a return.
And you know since you don't get the gap really in forex it's going to look like this but it says the
same thing.
It says that the buyers have run out of steam.
You know this might have a candlestick week here and this might have this here and that there and that
there and that there.
But it says the same thing.
It says that we are rolling over higher timeframes I mean more as per usual.
And again it doesn't necessarily have to mean a trend change in a lot of time the abandoned baby really
doesn't unless it truly has the gaps and know that that would be like on the daily or weekly timeframe.
And I can't imagine that happening in the forex world.
It could even find an example if I was looking for one.
But we do have our modified on forex charts that gives us an idea that you know I'd say that it's an
imminent pullback measuring that against the Morningstar pattern which has two long sticks and then
the little body there.
That to me is a much stronger signal and it does tend to work out for a much bigger reversal.
So it's probably the weaker of the two patterns but it is something worth paying attention to.