Hikkake Pattern
Encyclopedia
The Hikkake pattern is a technical analysis
pattern used for determining market
turning-points and continuations. It is a simple pattern that can be observed in market price
data, using traditional bar chart
s, or Japan
ese candlestick chart
s.
Though some have referred to the hikkake pattern as an "inside day false breakout," this is a deviation from the original name given to the pattern by Daniel L. Chesler, CMT and is not popularly used to describe the pattern. For example, the name "hikkake pattern" has been chosen over "inside day false breakout" by the majority of book authors who have covered the subject, including: "Technical Analysis: The Complete Resource for Financial Market Technicians" by Charles D. Kirkpatrick and Julie R. Dahlquist, and "Long/Short Market Dynamics: Trading Strategies for Today's Markets" by Clive M. Corcoran, and "Diary of a Professional Commodity Trader" by Peter L. Brandt.
contraction in the market, followed by a relatively brief price move that encourages unsuspecting traders and investors to adopt a false assumption regarding the likely future direction of price. The pattern, once formed, yields its own set of trading parameters for the time and price of market entry, the dollar risk amount (i.e., where to place protective stops), and the expected profit target. The pattern is not meant as a stand alone "system" for market speculation
, but rather as an ancillary technique to traditional technical
and fundamental
market analysis methods.
Technical analysis
In finance, technical analysis is security analysis discipline for forecasting the direction of prices through the study of past market data, primarily price and volume. Behavioral economics and quantitative analysis incorporate technical analysis, which being an aspect of active management stands...
pattern used for determining market
Market
A market is one of many varieties of systems, institutions, procedures, social relations and infrastructures whereby parties engage in exchange. While parties may exchange goods and services by barter, most markets rely on sellers offering their goods or services in exchange for money from buyers...
turning-points and continuations. It is a simple pattern that can be observed in market price
Market price
In economics, market price is the economic price for which a good or service is offered in the marketplace. It is of interest mainly in the study of microeconomics...
data, using traditional bar chart
Bar chart
A bar chart or bar graph is a chart with rectangular bars with lengths proportional to the values that they represent. The bars can be plotted vertically or horizontally....
s, or Japan
Japan
Japan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...
ese candlestick chart
Candlestick chart
A candlestick chart is a style of bar-chart used primarily to describe price movements of a security, derivative, or currency over time.It is a combination of a line-chart and a bar-chart, in that each bar represents the range of price movement over a given time interval. It is most often used in...
s.
Though some have referred to the hikkake pattern as an "inside day false breakout," this is a deviation from the original name given to the pattern by Daniel L. Chesler, CMT and is not popularly used to describe the pattern. For example, the name "hikkake pattern" has been chosen over "inside day false breakout" by the majority of book authors who have covered the subject, including: "Technical Analysis: The Complete Resource for Financial Market Technicians" by Charles D. Kirkpatrick and Julie R. Dahlquist, and "Long/Short Market Dynamics: Trading Strategies for Today's Markets" by Clive M. Corcoran, and "Diary of a Professional Commodity Trader" by Peter L. Brandt.
Conceptual basis
The pattern consists of a measurable period of rest and volatilityVolatility (finance)
In finance, volatility is a measure for variation of price of a financial instrument over time. Historic volatility is derived from time series of past market prices...
contraction in the market, followed by a relatively brief price move that encourages unsuspecting traders and investors to adopt a false assumption regarding the likely future direction of price. The pattern, once formed, yields its own set of trading parameters for the time and price of market entry, the dollar risk amount (i.e., where to place protective stops), and the expected profit target. The pattern is not meant as a stand alone "system" for market speculation
Speculation
In finance, speculation is a financial action that does not promise safety of the initial investment along with the return on the principal sum...
, but rather as an ancillary technique to traditional technical
Technical analysis
In finance, technical analysis is security analysis discipline for forecasting the direction of prices through the study of past market data, primarily price and volume. Behavioral economics and quantitative analysis incorporate technical analysis, which being an aspect of active management stands...
and fundamental
Fundamental analysis
Fundamental analysis of a business involves analyzing its financial statements and health, its management and competitive advantages, and its competitors and markets. When applied to futures and forex, it focuses on the overall state of the economy, interest rates, production, earnings, and...
market analysis methods.