Bullish Homing Pigeon Pattern – Strategies And Information

Bullish Homing Pigeon Pattern: Technical analysts rely heavily on chart and candlestick patterns to conduct comprehensive analyses of stock prices and accurately predict their future movements. Each pattern formed in the market has a clear and justified reason behind its formation and provides an indication of the market’s direction.

Here in this article, we shall discuss a two-candlestick pattern called the bullish homing pigeon pattern with its meaning, formation, indication, and how to set up a trade with this pattern formation.

Bullish Homing Pigeon Pattern – Definition    

A Bullish Homing Pigeon Pattern appears when the market is in a downtrend and its formation indicates it will go up. This two-candlestick pattern comprises two bearish candles (red candles) with the first bearish candle having a bigger body and the second candle is formed within the body of the first candle.

While the formation of the pattern is preferable during a downtrend, it can also be used if it appears after it retraces from an uptrend.

Bullish Homing Pigeon Pattern – Formation 

Two conditions need to be filled in order for a two-candlestick pattern to be formed as a bullish homing pigeon:

Condition 1 – Both the candlesticks need to be a bearish candle (red candle) with the first candle’s body being bigger than the second candle.

Condition 2 – The second candle’s body needs to be formed within the body of the first candle. 

The best scenario for this candlestick to form would be after a downtrend or during a retracement in an uptrend.

The Psychology Behind The Pattern 

When the market is in a downtrend, the first red candle in the pattern is formed with a big body because of high selling in the market. The formation of the second small red candle within the body of the first candle indicates a weakness in the selling pressure. This reduction in selling pressure might bring in more buyers in the market.

Therefore, the market generally tends to reverse the trend and move upwards after the appearance of the bullish homing pigeon pattern.

Bullish Homing Pigeon Pattern – Trading Strategies 

Before entering the trade using the homing pigeon pattern, one must check if the security has been in a downtrend or has retraced from an existing uptrend. If this condition is met, one can trade the homing pigeon pattern in the following way:

• Entry – the proper entry price would be to take a long position just above or at the close price of the second candle in the pattern. But if a trader wishes to have a safer entry then, they should wait for a bullish candle to start trading above the high of this pattern and then take a long entry.

• Target – Traders can exit the trade when the price of the security reaches near the immediate resistance zone. Once this level is reached, partial profits can be booked in the trade can be booked and the remaining position can be held until the next resistance level.

• Stop loss – The stop loss should be placed just below the low of the bullish homing pigeon pattern.

bullish homing pigeon pattern – Examples

Example 1 – bullish homing pigeon pattern forming in a downtrend

In the above chart, the two candlesticks enclosed in the blue rectangle is called as bullish homing pigeon pattern. We can see that ICICI BANK was on a downtrend and it reversed after the formation of the homing pigeon pattern.

The entry for that trade would have been at Rs. 296.15 and the stop loss was at Rs. 285

Example 2 – bullish homing pigeon Pattern forming in retracement during an uptrend

In the above chart, the formation of two candlesticks enclosed in the blue rectangle is the bullish homing pigeon pattern. Here we can observe that when the STATE BANK OF INDIA stock was in an uptrend, the homing pigeon pattern was formed in a retracement and the price went up exactly from there. 

The entry for this trade would have been at Rs. 530.15 and the stop loss was at Rs. 520.00.

Conclusion

In this article, we understood what the formation of a bullish homing pigeon pattern indicates, how a trader can analyze it, and how they can take a trade. In conclusion, it is necessary to remember that candlestick patterns should always be paired with other indicators and confirm the trend reversal before taking a trade.

The market is always unpredictable and may move against the indication or analysis. Hence, a trader must always place a stop loss to minimize losses in such scenarios. What are your views about this pattern, please let us know in the comments below.

Written by Praneeth Kadagi

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