what is hikkake pattern 
the hikkake pattern is a price pattern used by technical analysts and traders hoping to identify a short term move in the market s direction the pattern has two different setups one implying a short term downward movement in price action and a second setup implying a short term upward trend in price understanding hikkake patternthe hikkake pattern pronounced h kah kay is a complex bar or candle pattern that begins to move in one direction but reverses quickly and is said to establish a forecast for a move in the opposite direction this pattern was developed by daniel l chesler cmt who first published a description of the pattern in 2003 the pattern has four key points once the fourth characteristic is achieved the pattern implies a continuation in the direction of the final candle the following two charts show examples of both setups image by sabrina jiang investopedia 2021the first pattern is for the bullish setup each of the four characteristics is marked to show where they have occurred in these examples the second pattern for the bearish setup is less frequently observed image by sabrina jiang investopedia 2021the name of this pattern comes from a japanese word meaning hook catch ensnare when the hikkake pattern was first described by chesler he was looking to describe a pattern he had noticed that seemed to trap traders committing capital to a market only to see it move away from what they expected from a conceptual basis the hikkake pattern is made up of a short term decrease in market volatility followed by a breakout move in price action this move the third candle in the pattern will tend to entice traders into thinking a breakout has formed traders enter the market and set a stop in the opposite direction of their trade if the price pattern reverses then the traders stop loss orders kick in and may give a boost to the price as it reverses past the boundary of the second candle in the formation where the stop orders are likely to be example of a hikkake patternimage by sabrina jiang investopedia 2021this pattern occurred in the price action for shares of microsoft msft and is somewhat typical of how this pattern plays out slightly more than half the time it occurs the pattern shown in this chart is the bullish setup and holds all four characteristics described above here the price pattern is highlighted by a rectangle and the implied forecast is for a bullish move in the days beyond the rectangle this example shows that the chart had a mild upward trend after leaving the boxed area not all hikkake patterns play out to the correct forecast direction investopedia does not provide tax investment or financial services and advice the information is presented without consideration of the investment objectives risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors investing involves risk including the possible loss of principal 