Homing Pigeon

The homing pigeon candlestick is a bullish reversal pattern that indicates a weakening of the current downtrend. This candlestick consists of two black (or red) candlesticks where the stock price has closed down from the opening price. This candlestick pattern is the same as the harami candle except for the color of the second day’s real body.

When identifying the homing pigeon candlestick reversal pattern stock investors must look for certain criterion. First, as stated above, the market must be in a downtrend. Second, the body of the first candle is black. Third, the body of the second candle is also black and is completely engulfed by the real body of the first day’s candle. (This means that the second day actually opens higher than the close of the previous day’s candle. Also, the second day’s candle closes lower than the open of the first day but is still closes above the closing price of the first day’s candle). Confirmation is required on the third day to indicate that the trend is moving up and typically occurs in the form of a white candlestick, or a large gap up, or a higher close on the following day.

What does the homing pigeon candlestick indicate is occurring in the markets?
A long downtrend has occurred and a long black candle occurs. The bulls open the price higher than the previous day’s close as the second day’s candle gaps up. Traders then wait for the second day’s candle to exceed the high of the first day’s candle before taking a long position. (Short sellers notice that the trend has been violated). The bears are then less concerned as the bulls begin to worry. The reversal is more convincing the higher the second candle closes up on the first black candle. When trading stock traders believe that the market usually has a tendency to enter into a congestion phase following this candlestick pattern.

Japanese Candlesticks are the fastest way for new investors to quickly and accurately read stock charts. Once you are comfortable with the major candlestick signals, and you have learned how to read stocks charts , continue to expand your expertise by learning the various secondary Candlestick Patterns . Combine these with your favorite technical analysis indicators, such as the moving average , and you have the perfect trading arsenal for evaluating stocks, currencies, commodities, or exchange traded funds .

Please continue your candlestick pattern education and read about the ladder bottom candlestick.