Hikkake Pattern12 March 2010, 11:43 BST
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 .
- Trading False Moves with the Hikkake Pattern - PDF file
- Quantifying Market Deception with The Hikkake Pattern - PDF file
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