Candlestick Patterns
Homing Pigeon
A small candle contained inside the prior candle's body looks like a harami either way. The color of that small candle is what actually decides whether it means reversal or continuation.
Two panels, same shape, one color difference
Both panels below are built from the exact same containment math: a small candle fully inside the prior candle's real body, computed the same way in both. The only thing that differs is the color of the small candle. Call each panel "Reversal" or "Continuation" before revealing what price actually did, then check your running score. The point isn't to test your pattern recognition, it's to show that the shape alone tells you nothing without checking the color.
Panel A
Panel B
How it works
- The containment test is identical in both panels. The small candle's open and close have to sit fully inside the range spanned by the prior candle's open and close, computed off the same numbers every time.
- An opposite-colored small candle is the classic bearish or bullish harami. After a strong move, a small candle of the other color sitting inside the prior body is read as hesitation and a possible reversal.
- A same-colored small candle is the homing pigeon. Same shrinking range, same containment, but because the color matches, it reads as indecision inside an already-established move, not a reversal warning.
- Color is the only variable that changes here. Both panels use the same generator for the containment geometry, so any difference in outcome traces back to which color got assigned to the small candle, not to some hidden shape difference.
- Checking your score is the real lesson. A visitor who calls both panels the same way, ignoring color, will land near a coin flip. One who checks color first should do meaningfully better.
Where this breaks
Homing pigeon is a weak continuation signal, not a strong one
Even after correctly reading the color, a homing pigeon only suggests the down move probably isn't finished, it doesn't guarantee the next leg lower actually happens. The shrinking range at the heart of both patterns is real indecision, and indecision can resolve either direction regardless of which color candle produced it. Traders who treat a same-color containment candle as a confident continuation signal are overreading a pattern whose entire premise is that the market briefly stopped agreeing with itself. The forward outcomes tracked in the panels above will show plenty of continuation calls that fail and plenty of reversal calls that succeed anyway, which is the honest base rate for a two-candle pattern this small.