Definition - After a black body forms, this will soon engulf a smaller black body seen on the second day. As you might have noticed, this is the same as the Harami pattern except for the fact that both bodies are black this time around.
- On the first day, a black body will be observed in a market that is characterised by a prevailing downtrend.
- After a second black body forms on the second day, it will become engulfed by the pre-existing candlestick.
Patterns and Flexibility
Consisting of two black candlesticks, the Bullish Homing Pigeon sees the first body completely engulf the second body that appears the next day. For the pattern to appear successfully, the first candlestick must be normal or long. Regardless, the second day’s body must be smaller than the first; the body tops or bottoms could be seen at the same level.
Behaviour of Trader
When this pattern shows, it is a signal of disparity within the market. To start, there will be heavy selling which will be seen by the black body in the market experiencing a downtrend. However, a trend reversal is suggested via the smaller body that appears on the second day because it shows diminishing power and enthusiasm.
Buy/Stop Loss Levels
For there to be confirmation, the price will cross above either the midpoint of the first black body or the previous close - normally, the higher of the two will be used. Furthermore, the lower of the two lows will be used for the stop loss level. If prices fall rather than rise following the buy, and if there are two consecutive days where the lows fall beneath the stop loss level, the stop loss will be triggered assuming that there is no bearish pattern detected.