What is Abandoned Baby Pattern: Definition & Meaning Explained

Definition of Abandoned Baby Pattern

An Abandoned Baby Pattern is a type of candlestick pattern that signals the reversal of a bullish or bearish trend. It is made up of three candles, each of which varies based on the trend.

Bullish Abandoned Baby Pattern

Candle #1: Red in color & forms during a downward trend
Candle #2: Forms a Doji Star below Candle #1’s closing price
Candle #3: Leads to a bullish trend & forms above the Doji Star (similar size to Candle #1)

Bearish Abandoned Baby Pattern

Candle #1: Green in color & forms during an upward trend
Candle #2: Forms a Doji Star above Candle #1’s closing price
Candle #3: Leads to a bearish trend & forms below the Doji Star (similar size to Candle #1)

Indices

Indices are a collection of financial instruments that measure the performance of those very instruments.

For example, stock market indices like Nifty 50 and Sensex measure the top 50 and 30 stocks by market capitalization.

If indices go up, it generally means that the underlying stocks are performing well. The opposite is true when indices plummet.

By the way, there’s no limit to how many instruments an index can track. The Nifty Smallcap 250 tracks 250 stocks whereas Nifty Bank tracks 12 stocks.

Commodity Spread Straddle

A commodity spread straddle or simply a commodity straddle is an options trading strategy where a trader will buy call and put options with the same strike price and expiration date.

The goal of a commodity straddle is to create a neutral strategy that wins in the event that the underlying security’s price rises or falls. That said, the profits must be higher than the total premium paid for the options.

Basis Of Allotment

The basis of allotment is the criteria to allocate shares to investors, most commonly during IPOs. Criteria or basis for allotment lays out the following information:

The difference between the spot and futures prices forms the “basis” for the trading strategy. Hence the name basis trading. These are the two ways in which a trader may use the basis:

Share allocation ratio
Bids
Demand
Final price

The basis of allotment can vary based on the type of investor in question. Bidders during an IPO for whom a different basis of allotment applies include:

Retail Individual Investors (RII)
Qualified Institutional Buyer (QIB)
Non-Institutional Buyers (NIBs)
High Net-worth Individuals (HNIs)
Anchor Investors

CANSLIM

CANSLIM is an acronym for a seven-step strategy to pick growth stocks by combining fundamental and technical analysis. Here’s the full form of CANSLIM:

Current quarterly Earnings Per Share (EPS): compare this fundamental indicator with the same figure from the previous quarter. If the figure grows (by 20% or more as a rule of thumb), the company is fundamentally strong.

Annual earnings: Compare this fundamental indicator from the previous years. If there’s year-on-year growth, the company is fundamentally strong. If the year-on-year growth is by 20-25%, even better.

New product or service: strong companies continue to innovate. That’s what this letter is about - checking if the company is continuously launching new products, services, or holding events.

Supply: a fundamentally strong business should have a good supply and demand when it comes to its goods, services, and stock. Executive supply of shares may reduce the value of the company - that’s why it should always be scarce in supply.

Leader: the company should be a leader in its own right, either in or across industries.

Institutional holding: a valuable company will have higher institutional ownership, the percentage of which should always be tracked.

Market trend: an investor must check whether the company or stock is going or against the trend by comparing it to broader indices.

*All securities mentioned on this website are exemplary and not recommendatory.

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Abandoned Baby Pattern