Homing Pigeon Candlestick Pattern

How a Homing Pigeon candlestick pattern is formed?

During a downtrend, a black candle is formed on the first day. The second candle is a short black candle showing a narrow trading range. It is also engulfed in the first line that shows that it is included in the first day’s trading range. This weakens the power of the downtrend. It predicts the arrival of buyers on the market which may result in a reversal of the trend.

How to identify the pattern?

As we have already discussed that a Homing Pigeon candlestick pattern consists of two candle lines. It appears usually in the downtrend. Therefore, you should look for a two-line candlestick pattern in a downtrend. It should be a long black body on the first day followed by a second black body that is contained in the first body.

What does a Homing Pigeon candlestick pattern tell traders?

There are many bearish traders and investors on the market who strongly believe that it will continue to fall. When the first candle of the Homing Pigeon candlestick pattern is formed, the same scenario develops. The formation of a long bearish candle confirms the possibility of an upcoming bearish trend. After some quieter buying period, some buying pressure begins to establish itself. Traders assume the reversal of the trend in the market. This assumption causes a gap between the two candlesticks. However, the buying pressure still fails to move the market up, hence making the second candle bearish.

How to trade the pattern?

In a Homing Pigeon candlestick pattern, a trader should enter a long position. Placing the stop loss below the low of the pattern is a wise move. They can also place the stop loss below the low of the second line as well.

During a downtrend, traders should wait for enough for the prices to decrease after the formation of the Homing Pigeon pattern. Now, they should enter a short position, and placing the stop loss above will be a wise decision.

However, it must be remembered that the Homing Pigeon pattern does not give a price target. It is possible that a new trend may start after the patter or price may not move at all. Therefore, traders should base price target on a well-defined risk-reward, a well-measured move, or according to a trading strategy and risk management.