Trading the Powerful Kicker Pattern

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Trading the Powerful Kicker Pattern

Probably the most powerful reversal signal in the candlestick charting universe, the Kicker pattern is one you need to know. It signals a massive shift in the sentiment of traders, often completely reversing the trend. And when they work out, you will be in the in-the-money quickly.

The Kicker Pattern

The kicker pattern is a major reversal signal, so we look for it after a sustained trend higher or lower. It is a very sharp reversal that occurs over two candles, although looking at several candles will provide a better context for whether it is a good kicker pattern or not.

Here is what the patterns look like.

Figure 1. Bearish and Bullish Kicker

If you are unfamiliar with how to read candlestick charts, see Introduction to Japanese Candlestick Charts.

For the bearish pattern, the price is in an uptrend, with the first bar of the two bar pattern being an up bar (white: close is higher than open). The second bar of the pattern is a strong down bar (black: close is well below open). It opens at or below (gaps down) the open of the first candle. Basically the second bar should show a very strong shift in sentiment, where there is no hesitation on the part of sellers.

For the bullish pattern, the price is in a downtrend, with the first bar of the pattern being a down bar. The second bar of the pattern is a strong up bar. It opens at or above the open of the first candle. The second bar shows a very strong shift in sentiment, where is no hesitation on the part of buyers.

This pattern is typically seen on daily, weekly or monthly chart and more frequently in markets that close each night–such as the stock market. In the forex market this type of pattern would only occur if the second bar occurs after a weekend.

A trade is taken right near the close of the second bar, or alternatively at the open of the next bar. With such a strong shift we assume that the next bar following the pattern will also be strong, and in the same direction as the second candle.

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Waiting for some sort of confirmation on this type of pattern is likely to do more harm than good since the price is likely to continue to run away from you.

Get in quickly and the price should quickly move you into the money. If the price doesn’t continue to the run in the same direction as the second candle, then get out (if trading traditional markets). A stop loss can be placed near the middle of the second candle, and moved to lock in profit as the price moves in your favor. Since this pattern can result in a full-fledged reversal there is no price target, so get out when momentum slows and look for other opportunities.

Figure 2 shows a bearish kicker pattern (circled).

The trend is up, marked by the series of white bars. Then we have a strong down bar, that opens at or below the prior up bar. Most importantly, the down bar is very strong with the close of that bar finishing near the low–showing little hesitation on the part of sellers. Ideally the second candle should close even closer to the low. In figure 2 there was a brief pause and a bit of a retrace into the second bar before the selling resumed. This is why an initial stop is placed near the middle of the second candle, then quickly moved once the price moves in our favor.

This is a good pattern, but no pattern is perfect. While it does often result in a reversal, finding the exact spot place to put a stop loss and a target can be tricky. The hope is the that the momentum from the second candle puts you in the money right away and then the trade can be managed more easily. If trading binary options, choose an expiry that allows enough time for the price to clear the second candle. The stronger second the candle the better, and the second candle gapping away from the first candle is another probability enhancer.

Kicker Pattern

What is a Kicker Pattern

A kicker pattern is a two-bar candlestick pattern that is used to predict a change in the direction of the trend for an asset’s price. This pattern is characterized by a very sharp reversal in price over the span of two candlesticks; traders use it to determine which group of market participants is in control of the direction. The pattern points to a strong change in investors’ attitude surrounding a security. This usually occurs following the release of valuable information about a company, industry or an economy.

BREAKING DOWN Kicker Pattern

The kicker pattern is deemed to be one of the most reliable reversal patterns and usually signifies a dramatic change in the fundamentals of the company in question. To traders observing the kicker pattern, it may seem like the price has moved too quickly, and they may wait for a pullback; however, those traders may find themselves looking back and wishing they had entered a position when they originally identified the kicker pattern.

While the kicker patter is generally considered one of the strongest bull or bear sentiment indicators, the pattern is, however, rare. Most professional traders do not rapidly overreact in one direction or another. If, and when the kicker pattern presents itself, money managers are quick to take notice.

The kicker pattern is often regarded as one of the most powerful signals available to technical analysts. Its relevance is magnified when it occurs in overbought or oversold markets. The two candles behind the pattern take on visible significance. The first candle opens and moves in the direction of a current trend and the second candle opens at the same open of the previous day (a gap open), and then heads in the opposite direction of the prior day’s candle. The bodies of the candles are opposite colors in many trading platforms, offering this formation a colorful display of the dramatic change in investor sentiment. Because the kicker pattern occurs only after a significant change in the market’s attitude; the indicator is often studied with other measures of market psychology or behavioral finance.

Trading the Powerful Kicker Pattern

Last Updated: June 20, 2020

Will you do me a favor? Picture a punt kick. A football player drops a ball, kicks it forcefully before it hits the ground, and then watches (along with crowds of cheering spectators) as the ball flies up toward the sky. Now, as you try to identify and memorize the Bullish Kicker candlestick pattern, use that image as a reference. Somewhat like a punt kick, the price drops down and then kicks back up with a gap forming between the first and second candle (i.e., the grass and the ball), indicating an abrupt change in sentiment. To learn more about this kicky candlestick signal, please scroll down . . .

Bullish Kicker Candlestick Pattern

Formation

To identify a Bullish Kicker candlestick pattern, look for the following criteria:

First, the first candle needs to be a black or bearish candlestick. Second, the second candle (which is white or bullish) must open above the close of the first candle, forming a gap. Third, the movement of the price during the formation of the second candlestick should never drop into the gap formed between the first and second candle. As you might have guessed, this means that there is rarely a bottom wick on the second candlestick.

The Bullish Kicker candlestick pattern doesn’t need to form after a significant downtrend, but it often does. When this happens, the sudden change in attitude is likely due to a game-changing news event.

Finally, if you spot a pattern with the opposite formation (a white candle followed by a black candle that gaps down and never rises into the gap), you may have a Bearish Kicker on your hands. It is a bearish reversal signal that heralds further downward movement. Like the Bullish Kicker, the Bearish Kicker proves rare but reliable.

Meaning

The first candle in the signal continues with the current trend, moving downward, but then a major event causes the second candle to gap up. The price bursts upward with bullish enthusiasm. Thus, the Bullish Kicker candlestick pattern portrays a strong change in investor opinion. Not only is there a bullish candle following a bearish candle, but the strength of the switch resulted in a gap between the two candles.

The Bullish Kicker signal often occurs after a major surprise in the news that is announced before or after market hours. Something drastic has happened, causing a great shift in investor sentiment, and a reversal will inevitably follow. The larger the gap between the two candles, the more significant the signal.

Examples

Sometimes it is difficult to translate classroom lessons to the real world. For example, although you can easily discern a Bullish Kicker candlestick pattern when it is presented on its own, can you imagine what it will look like in the middle of a candlestick chart? To get a better handle on the formation of the Bullish Kicker and to see how it might pop up during the course of a trading session, review the trio of examples below.

EXAMPLE 1:

As you can see, the lowest black candle on the chart is followed by a gap up and a white candle, creating a Bullish Kicker. Although the second candle has a substantial lower wick, it doesn’t enter the first candle’s body. This is crucial, because if it did, the Bullish Kicker would not exist because the wick would close the gap between the candles. It is okay, however, that the candles’ wicks cross paths. Following the pattern, as expected, a reversal occurs and an uptrend begins. Although peppered with black candles, the upward price movement is strong, creating a steep escalation.

EXAMPLE 2:

On this chart, the Bullish Kicker candlestick pattern is more dramatic. Neither of the candles involved has wicks, so the gap between them is clear. The gap is also wide, increasing the pattern’s significance and reliability. Following the Bullish Kicker pattern, a vast gap appears, followed by a pair of white candles. The signal proved successful in predicting the future. Confident investors will be rewarded for trusting this Bullish Kicker.

EXAMPLE 3:

In our last example, both candles have two wicks. Crucially, the white candle’s bottom wick doesn’t extend into the red candle’s body. As you have learned, the signal heralds a bullish reversal, which occurs directly thereafter. Following the gap, there are several white candles (and only one red) and the price moves consistently upward. Although the steady uptrend eventually gaps down (and is followed by a strong bearish candle), that jump in price doesn’t dampen the Bullish Kicker’s success. Any investors relying on the pattern’s prophetic reliability would certainly be pleased.

CONCLUSION

Explosive and powerful, the Bullish Kicker should not be overlooked. Most traders place it amongst the strongest and most influential candlestick patterns in existence, so when you spot it, be prepared for action! Although you would typically confirm the reversal by checking for more bullish movement (continued uptrend, white candles, a gap up), the Bullish Kicker candlestick pattern is a strong indicator of change on its own. Buyers are undoubtedly taking control of the stock, so if you’re ready to embrace a bit of risk, feel free to jump right in.

However, the Bullish Kicker candlestick pattern is also unfortunately rare. Traders don’t often change their opinion of a stock so dramatically and quickly. They tend to be more moderate, slowly shifting one way or the other. Because of this, when you do spot the Bullish Kicker, it is important that you pay attention. Unlike many other candlestick patterns, when the Bullish Kicker appears, it packs a punch (or should I say a kick?). It doesn’t whisper its message—it shouts!

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