Good morning, financial market readers. I hope you know how important technical analysis is for trading in financial markets. One of the most popular tools used in technical analysis is the Japanese candlestick chart. This analysis method uses indicators like candlestick formations to interpret market psychology and make trading decisions. One of these formations, the "Homing Pigeon" candlestick pattern, is an important indicator that is especially used to identify trend reversals. We will take a thorough look in this article at what the Homing Pigeon pattern is, how it is defined, and how it can be used in trading strategies.
- Topic: Homing Pigeon
- Type: bullish
- Trend direction: reversal and correction
- Opposite pattern: Descending Hawk
What Is the Homing Pigeon Candlestick Pattern?
The Homing Pigeon is a two-candle pattern
seen on price charts. It appears during a downtrend and often signals that
selling activity may soon weaken. This pattern helps traders identify when the
market could be ready to change direction from bearish to bullish. By
understanding the Homing Pigeon pattern, traders can notice when the market
starts to lose its downward strength and may soon turn upward. This helps them
plan their next buy entry with more confidence.
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| Homing Pigeon Pattern |
When you see the Homing Pigeon candlestick
pattern on a chart, it usually appears after a clear downtrend. The first
candle is long and red, showing strong selling activity. The second candle
forms inside the body of the first one and is smaller in size, meaning that
sellers are losing control. This setup tells traders that the market may be
preparing for a short-term reversal or the beginning of a new upward phase.
Where Does the Name "Homing Pigeon" Come From?
The pattern is called the "Homing Pigeon" because the second candle sits completely inside the first one, just like a
pigeon returning to its home. This shape on the chart shows calmness after
strong selling. It visually represents the market moving from fear and pressure
to balance and early signs of confidence.
The Homing Pigeon candlestick pattern is
often seen by traders as a sign of stability forming inside a falling market.
Its structure reminds traders that a strong trend can slow down before a
reversal begins. When the second candle appears inside the first, it shows that
sellers are losing control and buyers are slowly returning. Understanding this
signal helps us read price movements more clearly and manage entries with
better timing.
Definition of the Homing Pigeon Pattern
Each movement of the candlesticks reflects the psychology of
market participants, and the Homing Pigeon pattern gives signals that this
psychology may be changing direction. The Homing Pigeon candlestick pattern is
a formation that appears at the end of a downtrend and signals a bullish
reversal. This pattern is a structure that stands out in Japanese candlestick
analysis and often indicates the end of downtrends and the beginning of an
uptrend. The Homing Pigeon pattern is formed by two candles:
- First candlestick: A long red bearish candle. This indicates the continuation of bear pressure and the trend moving downwards.
- Second candlestick: A shorter, bearish candle entirely within the body of the first candlestick. This shows a decrease in bear aggression and a preparation for bulls to take action.
The Homing Pigeon pattern is a two-candlestick pattern that
consists of two consecutive candles. The first candle forms during a downtrend
and shows a decline. The following second candle then forms within or near the
body of the previous candle. The second candle can often have a smaller body
and a smaller shadow.
Trading the Homing Pigeon Candlestick Pattern
The Homing Pigeon candlestick pattern forms at the end of a bearish trend and signals a bullish reversal, showing that selling force is starting to ease. The first candle is long and red, reflecting strong bearish activity. The second candle closes entirely inside the first, indicating that sellers are losing strength and buyers are beginning to appear.
This pattern helps us identify areas where the market may reverse from falling prices to upward movement. When combined with other technical indicators, the Homing Pigeon pattern provides a clear visual signal for making informed trading decisions. This pattern helps traders notice shifts in the market and make decisions with greater clarity.
- Buying: Once we are sure that the prices are rising in the area where this pattern appears, that is, if the prices rise after the second candle, we can take a Long position.
- Stop Loss: A Stop Loss order can be placed below the level where the Homing Pigeon formation appears or below a support level under the pattern.
- Target: Assuming that the level at which the pattern forms is the beginning of an uptrend, we can think that the trend will continue and the target will be at higher levels. For this reason, targets can be resistance levels observed on the chart or points where the price reached in previous rises. Along with this, risk/reward ratio and other technical tools can also be used for target setting.
Here is an example of trading with the Homing Pigeon pattern
on the Boeing Company stock:
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| Homing Pigeon on Boeing Company stock. |
In addition, the Homing Pigeon candlestick pattern can lead to a correction when it appears in strong trends. For example, see the chart below for Bank of America Corporation stock:
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| Trend correction with Homing Pigeon pattern |
🛈 Note 1: The Homing Pigeon pattern is similar to the Harami candlestick pattern, but there are a few key differences. In a Harami, the color of the second candle (bullish or bearish) does not matter. In a Homing Pigeon, however, both candles must be bearish. Some traders believe that both patterns are members of the same family.
🛈 Note 2: The opposite of the Homing Pigeon formation is known as the Descending Hawk candlestick pattern. The Descending Hawk is a bearish reversal formation that occurs at the end of a rising trend.
⚠ Don't forget. No trading strategy or pattern provides absolute reliability when trading in the Forex market. Candlestick patterns such as the Homing Pigeon pattern are no exception to this rule. Therefore, it is important to be careful when using this pattern and not to trade based on this pattern alone. The key to success in trading is to combine multiple indicators and analysis methods. Patterns such as the Homing Pigeon pattern can only indicate that the market may be changing direction, but they do not guarantee it. When using this pattern, it is important to consider other technical analysis tools and fundamental analysis elements as well.