What is a Bullish Homing Pigeon Pattern

Key Highlights

• The bullish homing pigeon candlestick pattern is an upside reversal pattern. However, it can sometimes be a negative continuation pattern.

• This pattern of candlesticks appears during a downtrend or pullbacks within upward trends.

• It has two real bodies: a larger one in the middle and a smaller one at the bottom. Both candles are filled or black, suggesting that the open is above the close.

• Bullish homing pigeon candlestick pattern does not give profit targets. Instead, a stop loss is usually put below the bottom level after confirmation of a price rise.

Definition of Bullish Homing Pigeon Pattern

The bullish homing pigeon is a two-candle pattern. One candle has a huge body. The other one is smaller and fits inside the body of the first candle. These two candles indicate a bullish reversal. Conversely, if the stock price isn't going in a straight line, the bullish homing pigeon might indicate a bearish continuation pattern. Moreover, the bullish homing pigeon pattern appears similar to the bullish candlestick harami pattern.

Formation of Bullish Homing Pigeon Pattern

The bullish homing pigeon candlestick pattern appears between two bearish candles. The second candle forms within the first one. The candles have to establish a downward trend because the pattern starts bullish. This indicates a reversal in the trend. In addition, both the candles are negative.

The bullish homing pigeon candlestick pattern has to satisfy these two requirements.

• A first candle must be bearish.
• The following candle is also bearish. However, it is engulfed within the range of the first candle.

The pattern suggests almost a bullish trend reversal. Both the candles shall be completely formed. The opening prices will be higher than the closing prices. In addition, traders can see an upward reversal because of the weak downtrend. There are no profit targets in the bullish homing candlestick pattern.

Confirmation of Bullish Homing Pigeon Pattern

It is often advised that traders wait for a signal or hint from the third and fourth candles. This will help them to determine if the market is moving in the anticipated direction or not. If the price closes above these candles, it may signal the start of a bullish trend reversal. The price may now drop with the second candle if it closes below any of the candles.

While trading, traders should use other technical indicators and tools for better results. These indicators will assist traders to confirm the signal and continue with their trades. The bullish homing pigeon is helpful in identifying pullback signals during an uptrend. Assume that there’s a price pullback as well as an increase. In such a situation, the bullish homing pigeon may indicate the end of the pullback and continuation of an upward trend.

Interpreting the Bullish Homing Pigeon

Now that you know what a bullish homing pigeon is, let's see how to read it. During a bearish trend, the investors are often doubtful about the market. They think that it will keep declining. This also occurs when the initial candle of a bullish homing pigeon appears. To support the negative sentiment, the pattern produces a long, bearish candle.

After declining for a while, some purchasing pressure will start to build again. Market players think that the market has to rise again, or at least experience a pullback. This is because it has been falling for quite some time. This leads to a positive difference between the first and second candles.

However, it quickly becomes clear that there isn't enough purchasing pressure to keep the market rising. This causes the second candle to become bearish. Yet, bulls were able to maintain the market within the previous candle's range. This serves as the bullish signal that reverses the trend.

Stop Loss Target for Bullish Homing Pigeon

Traders who set a stop loss at an appropriate level can benefit from market volatility. There is a rise in stock price after the bullish homing pigeon indicates a bullish reversal. The trader has two alternatives at this point. He can place a stop loss below the low to go long in the market. Or else, he may place a stop loss above the first candle and below the second.

Yet, this isn't always the case. Traders will sometimes use the continuation indicator. They will hold onto the trade for a while until the price breaks below the bullish homing pigeon pattern. A trader can do two things here. He may take a short position in the market by placing a stop loss above the bullish homing pigeon pattern. Or else, he can put a stop loss only above the second candle.

Conclusion

The bullish homing pigeon is a two-candlestick pattern. It may suggest an upside reversal or a bearish continuation, depending on the market condition. To confirm the pattern’s reliability, traders and analysts should focus on volume analysis and confirmation indicators. They should also consider the existing market conditions. Bullish homing pigeon candlestick patterns offer insightful information. However, it is always advisable to combine them with additional technical indicators and analysis to make well-informed trading decisions.