The Hikkake Pattern
(or Hikkake), 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 charts, or Japanese candlestick charts.
The phrase "Hikkake" is a Japanese verb which means to "trick"
or "ensnare." The pattern is comprised of a measurable period
of rest and volatility 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. Some technical analysts
may also refer to the Hikkake pattern as an "inside day false
breakout," however this term has never been formally adopted.
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.
Due to its popularity among institutional traders, the Hikkake
pattern has been adopted for use by INTSTREAM, the Nordic
power trading software company, in their E2 Energy Market
Analysis Platform.
Growing interest in the Hikkake pattern among traders and
investors has also spawned attention from various book
authors. See: "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.
The Hikkake pattern
was first discovered and introduced to the financial community
through a series of published articles written by technical
analyst Daniel L. Chesler, CMT. |
