Abandoned Baby Candlestick Pattern: The Rare Reversal With a Gap on Both Sides

The abandoned baby candlestick pattern is one of those setups most traders have read about and very few have actually seen on a live chart. It takes three candles, a doji in the middle, and a clean price gap on either side of that doji. When all of that lines up after a long trend, the message is blunt: the crowd that was pushing price ran out of steam, paused for a session, and then the other side took over with a jump. We’ll go through what the pattern looks like, why it forms, how traders usually handle entries and stops, and why its rarity is both its strength and its biggest practical problem on Indian charts.

What the abandoned baby candlestick pattern looks like

There are two versions, and they’re mirror images of each other.

The bullish abandoned baby shows up after a downtrend. Investopedia describes it as a three-bar pattern made of a strong down candle, then a doji that gaps down, then a strong bullish candle that gaps up. The doji is a candle whose open and close are roughly the same, so it shows a session where neither buyers nor sellers won.

The bearish abandoned baby is the top-of-trend version. According to Investopedia’s entry on the bearish pattern, it has a tall white (rising) candle with small shadows, then a doji-like candle separated from it by a gap, then another gap and a tall red (falling) candle with small shadows.

That middle candle is the “baby”. It’s “abandoned” because it sits on its own, with no overlap with the candle before or the candle after. Picture an island in the chart: price jumps to it, sits there for a day, and jumps away.

The three checks

Investopedia boils identification down to three characteristics, and they make a useful checklist:

1. A prevailing trend. The pattern is a reversal signal, so there has to be something to reverse. Three candles in the middle of a sideways range don’t count.
2. The right sequence. A big candle in the direction of the trend, a doji, then a big candle in the opposite direction.
3. Two gaps. One after the first candle and one after the second. In the strict version, the doji’s whole range, shadows included, sits beyond the ranges of its neighbours.

The doji is the whole story. One side pushed hard, then stopped, and the next morning the other side opened the door from a completely different price.

The psychology behind the three candles

Take the bullish case. Price has been falling hard, and the first candle is another heavy sell-off. Then comes the doji, opening below the previous close and ending near where it started. Investopedia reads this as selling levelling off: sellers may be losing momentum and buyers are starting to step in. The third candle opens above the doji and runs higher, which shows buyers have taken control and the selling has been exhausted, at least for now.

The bearish case is the same story turned upside down. A strong up day, a gap up into a session that goes nowhere, and then a gap down and a heavy red candle. The people who bought on the gap-up doji are now sitting on losses from the moment the third session opens. That trapped money is part of why the pattern carries weight when it does appear: those buyers often become sellers on any bounce.

What separates the abandoned baby from its more common cousins, the morning star and the evening star, is the gaps. A morning star’s middle candle can have a small body of any kind and may overlap its neighbours’ shadows. The abandoned baby insists on a doji and on true separation. Think of it as a morning or evening star with the volume turned all the way up.

How rare is it, really?

Very. Investopedia calls both versions rare, and for the bearish one it gives a figure: the pattern appeared roughly 50 times over the past two decades on S&P 500 stocks. That is a large basket of US stocks over a long stretch, and it still adds up to only a handful a year.

The same Investopedia page says that when the bearish abandoned baby occurs, price trends lower over the next 20 days about 65% of the time, with a median return of -3.00%, while the S&P 500 benchmark was positive over the same days. Two things to keep in mind about those numbers. The 65% is the share of occurrences where price was lower 20 days later, not a measure of how far it fell. And it comes from US stocks, so it tells you the pattern has a decent track record in that study, not what will happen on the NSE. We haven’t seen a comparable published count for Indian stocks, so treat any claim about its hit rate on Nifty names with suspicion unless the source shows its data.

Why it is even rarer on Indian daily charts

Here is a practical point that trips up a lot of people. For the strict pattern you need two genuine gaps, so the stock has to open well away from the previous session’s range twice in three days. In our experience, large and liquid stocks more often open near the previous session’s range than far away from it. Gaps happen, of course, especially around results, policy events and global shocks, but two clean gaps back to back with a doji in between is a tall order. Small and illiquid stocks gap more readily, but there the pattern is noisier because a few trades can create a gap that means very little.

That’s why many traders relax the rules. Investopedia notes that some allow slight variations: the doji may open near the prior close instead of gapping, or there may be two or three dojis before the move. The trade-off is simple. Every relaxation gives you more signals and a weaker one. Once you allow overlap, you’re basically trading a morning star or evening star and should judge it by those standards.

A worked example (hypothetical numbers)

Let’s build a bullish abandoned baby on a made-up stock, Company Z, to see how the levels work. None of these prices are real.

Company Z has fallen for three weeks, from around ₹880 to the low ₹700s.

• Day 1: a heavy red candle. Open ₹742, high ₹745, low ₹718, close ₹720.
• Day 2: the doji. Open ₹708, high ₹713, low ₹701, close ₹708. Its high of ₹713 is below Day 1’s low of ₹718, so there’s a clear gap down.
• Day 3: a strong green candle. Open ₹722, high ₹748, low ₹719, close ₹745. Its low of ₹719 is above the doji’s high of ₹713, so there’s a clear gap up.

The doji’s whole range, ₹701 to ₹713, is cut off from both neighbours. That’s the textbook shape.

Entry, stop and target

Investopedia lists a few common ways traders handle it, and we’ll apply them to Company Z.

Entry. Some traders enter on a break above the third bar’s high using a stop-limit order. Here that means a buy trigger just above ₹748. The idea is to wait for confirmation that buyers are still pushing after the pattern completes, rather than buying the Day 3 close blind.

Stop-loss. One choice is below the doji’s lower shadow, so just under ₹701. A tighter choice, for traders who want to risk less, is just below the low of the third bar, so around ₹719. From an entry near ₹749, the wide stop risks about ₹48 a share and the tight stop about ₹30. Investopedia also points out that volatility tends to rise around trend reversals, which is a good reason not to place the stop so close that normal noise knocks you out.

Target. The pattern doesn’t give a profit target of its own, so you need a separate exit method. One idea Investopedia gives is a Fibonacci retracement, for instance a 50% retracement of the downtrend that came before. Company Z fell from about ₹880 to the doji low of ₹701, a drop of ₹179. Half of that is about ₹90, so a 50% retracement target sits near ₹791.

Now the arithmetic. With an entry around ₹749 and a target near ₹791, the potential gain is roughly ₹42 a share. Against the wide stop (₹48 of risk), that is worse than one-for-one. Against the tight stop (₹30 of risk), it is about 1.4 to 1. So even a picture-perfect pattern doesn’t automatically give a good trade. The entry after confirmation eats into the upside, and that’s the price of waiting.

A perfect-looking pattern with a poor reward-to-risk ratio is still a poor trade. Do the maths before you fall in love with the shape.

Mistakes we see with this pattern

Calling any gap-and-doji an abandoned baby. If the doji’s shadows overlap the neighbouring candles, it isn’t the strict pattern. That’s fine, but label it honestly and expect less from it.

Ignoring the trend. The pattern needs a clear trend to reverse. A doji between two gaps in a stock that has gone nowhere for a month is just a choppy week.

Trading it into a results day or a big event. Gaps around quarterly numbers can create the shape without any real change in the trend. Check the calendar. If the second gap came from a one-off headline, the pattern may say more about the news than about buyers and sellers.

Forgetting that gaps fill. Gaps can get revisited. If Company Z slides back into the ₹713 to ₹719 space, the island structure is being undone. Our piece on gap fill trading explains why price so often returns to close these holes.

Using it alone. The pattern gets more convincing when it lines up with something else: a known support or resistance zone, a volume spike on the third candle, or a momentum indicator that had already started to diverge. On its own it’s a hint, not a verdict.

Abandoned baby vs similar gap reversals

It helps to see where it sits in the family. The kicker pattern is a two-candle gap reversal with no pause in between; the market just flips. The morning star and evening star are three-candle reversals that don’t need gaps or a doji. The abandoned baby is the strictest of the lot: three candles, a doji, and two gaps. More conditions mean fewer signals, which is exactly what the rarity figures show.

If you’re building a broader toolkit, our guide to technical analysis for Indian stocks puts candlestick patterns next to trend, support and resistance and indicators, so you can see how they fit together.

How to scan for it

Since it’s so rare, scrolling through charts by eye is a poor use of time. Investopedia notes that traders can scan for it using trading software, and most charting platforms let you write a simple condition: Day 2’s high below Day 1’s low and Day 3’s low above Day 2’s high (for the bullish case), with Day 2’s body small relative to its range. Add a trend filter, such as price below a falling moving average for the bullish version, and you’ll cut out most of the junk. Expect very few hits, and expect several of them to be in thinly traded stocks that you may not want to touch.

Our take

The abandoned baby is a clean, logical reversal signal. Momentum stalls, the crowd is left stranded on an island, and the other side opens the next session somewhere else entirely. The one study figure we have, for the bearish version on US stocks, gives it a decent record. But it’s rare, especially on liquid Indian large caps, and waiting for confirmation often leaves a thin reward-to-risk ratio. Use it as a strong clue when it turns up at a level that already matters, size the trade off the stop, and don’t stretch the definition just to see it more often.

Disclaimer: This article is for educational purposes only and is not investment advice. Company Z and all its prices are hypothetical. The pattern statistics quoted come from Investopedia and relate to US stocks; past pattern behaviour does not guarantee future results. Trading involves risk of loss, so do your own research and consult a SEBI-registered adviser before making investment decisions.