As of 12/20/2024   Indus: 42,840 +498.02 +1.2%     Trans: 15,892 +32.54 +0.2%     Utils: 986 +14.76 +1.5%     Nasdaq: 19,573 +199.83 +1.0%     S&P 500: 5,931 +63.77 +1.1%	YTD  +13.7%   0.0%    +11.9%    +30.4%    +24.3%	Targets    Overview: 12/12/2024     44,200 or 41,750 by 01/01/2025   16,100 or 17,700 by 01/01/2025   1,050 or 975 by 01/01/2025   20,500 or 19,300 by 01/01/2025   6,100 or 5,775 by 01/01/2025
Chart Pattern Indicator: on 12/5/24

As of 12/20/2024   Indus: 42,840 +498.02 +1.2%     Trans: 15,892 +32.54 +0.2%     Utils: 986 +14.76 +1.5%     Nasdaq: 19,573 +199.83 +1.0%     S&P 500: 5,931 +63.77 +1.1%	YTD  +13.7%   0.0%    +11.9%    +30.4%    +24.3%
Targets    Overview: 12/12/2024     44,200 or 41,750 by 01/01/2025   16,100 or 17,700 by 01/01/2025   1,050 or 975 by 01/01/2025   20,500 or 19,300 by 01/01/2025   6,100 or 5,775 by 01/01/2025
Chart Pattern Indicator: on 12/5/24

Bulkowski on the Bearish Hikkake Candle Pattern

My book, Encyclopedia of Candlestick Charts, covers over 100 candlestick types but not the hikkake.

Dan Chesler (CMT, CTA) discovered the hikkake candlestick pattern and popularized it in two articles, "Trading false moves with the hikkake pattern," from Active Trader magazine, April 2004, and "Quantifying market deception with the hikkake pattern," from The Technical Analyst, November 2004. I put it to the test and the following describes my findings for the bearish hikkake candlestick with confirmation.

Bearish Hikkake Candlestick: Important Results

I setup my program to find hikkake's based on a confirmed bearish hikkake pattern shown in the figure to the right. That includes the 3-bar hikkake and up to 3 additional days for confirmation. However, all of the numbers assume that confirmation occurs when price closes below the bottom of the 3-bar candle or above the top of the 3-bar hikkake pattern. That is how I measured the performance of all other candlestick types.     Theoretical performance: bearish when confirmed (but can act as a reversal or continuation) Tested performance: bearish continuation 50% of the time. Frequency rank: 18 Overall performance rank: 83 (1 is best out of 105) Best percentage meeting price target: 58% (bear market, down breakout) Best average move in 10 days: -5.65% (bear market, down breakout) Best 10-day performance rank: 15 (bear market, down breakout) The above numbers are based on hundreds of perfect trades. See the glossary for definitions.

Bearish Hikkake   Bearish Hikkake, Confirmed

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Bearish Hikkake Candlestick: Discussion

The bearish hikkake candlestick pattern resembles a three inside up candle pattern but without the constraints. The bearish hikkake doesn't require a falling price trend nor is candle color important as they both are in the three inside up candlestick.

In theory, the bearish hikkake is supposed to be a bearish candlestick, but it can act either as a reversal or continuation of an existing price trend. That's what I found, too. My numbers say the confirmed pattern is a continuation 50% of the time (random), with downward breakouts more than twice as likely to occur as upward ones (13,333 vs 6,666 samples). That shouldn't be a surprise because price is probably closer to the bottom of the confirmed candle than the top.

The bearish hikkake is plentiful, so plentiful that I limited samples to 20,000. It ranks 18th out of 105 candle types, where 1 has the highest frequency.

The best average move 10 days after price closed above the top of the highest high or below the lowest low in the 3-bar candlestick was 5.65% in a bear market after a downward breakout. That performance ranks 15th where 1 is best out of 105 candles, and that's quite good.

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Bearish Hikkake Candlestick: Identification Guidelines

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Bearish Hikkake Candlestick: Trading Tidbits

Here are some interesting facts my analysis turned up.

1. Performance for tall bearish hikkake candles is best in a bear market with average declines of 11.83%% logged. Tall means taller than 5.23% of breakout price divided by the height of the 3-bar pattern. Price after short hikkake candles drop just 7.56%, which is good, too. No other combination of up/down breakouts and bull/bear markets compete with the performance numbers.
2. Tall hikkake candles outperform the shorter ones in all combinations of bull and bear markets, up and down breakouts.
3. Breakouts below a 50-bar exponential moving average result in better performance in bear markets after downward breakouts: 10.54% versus 8.11%.
4. Once the three bars of the hikkake appear, place a buy stop below the lowest low in the pattern (or below the low of the inside day) to buy into the pattern in a timely manner.
5. Chesler says a stop placed at the opposite end of the pattern works well. For downward breakouts, use the highest high in the 3-bar pattern (I would put it a penny above the highest high). For upward breakouts, use the bottom of the pattern as a stop location.
6. Check out the three inside up candle pattern because the performance of that candle beats this one.

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Bearish Hikkake Candlestick: Example

The chart on the right shows a bearish hikkake in the Dow industrials (^DJI). I show the candle in the inset and it appears beginning at point A.

Starting from A, the first two days comprise the inside day followed by a higher high and higher low. Then this candle example moves sideways until candle B, which confirms the bearish hikkake by closing below the inside day (the candle line after A).

The industrials continue lower for a few days before rebounding in July 2009.

-- Thomas Bulkowski

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See Also

• Bullish hikkake. If you're bullish, check out this candle.
• Tall candles show support and resistance.
• Two candlestick tips could improve profitability.
• Candles near the yearly low perform best.
• Chart pattern breakouts: Which candlesticks appear most often the day before breakouts?
• Shadows. Do tall candle shadows predict price turns? Yes and no.
• Tall candles at peaks and valleys. Tall candles appear at turning points.

May your tongue stick to the roof of your mouth with the force of a thousand caramels.