I’m sure you’ll agree with me when I say:
There’s always a bull market, and there’s always a bear market.
It’s just a matter of when.
But if you want to profit from the market, there’s something you need to know.
That’s to avoid making mistakes when using the bullish Hikkake pattern.
In this post, I’m going to show you exactly what that pattern is and exactly how you can use it to get the best results in trading.
Let’s get started.
What Is a Bullish Hikkake Pattern?
This is probably one of the largest candlestick patterns to form that ranges up to 5 bars before confirmation.
This is a bullish reversal candlestick pattern that appears at a downtrend.
As part of the setup, there is a failed bullish harami pattern (inside bar), and the hikkake candlestick pattern is simply a continuation of it.
However, it’s a little more complex than that as we will find out when we come to identify it.
This pattern was discovered by Dan Chesler who also dubbed it as an inside day false breakout.
And that is what it truly is and serves as a good reminder that even if some candlestick patterns fail on their initial formation, you can use the price action to accumulate extra intel for entering a trade later on down the line.
What is the best timeframe to trade a bullish hikkake on?
This honestly doesn’t matter.
Trade what you see on any timeframe.
The way I see it is that there are more frequent, yet weaker signals in lower timeframes.
But the pattern forms anyway for a reason, so think about it logically whether to trade it or not.
Whereas the higher timeframes are less frequent as they have larger volumes of orders placed over a longer period of time, therefore, they tend to be more accurate.
Again, it must be said, the pattern forms based on price action and is NOT time-dependent, so irrespective of timeframe, if you see it then you should take it as a signal.
How To Identify a Bullish Hikkake Pattern Accurately
This pattern has a few checkboxes that must be ticked before becoming a valid signal.
Firstly, it must originally create a bullish harami pattern, like so:
(You should know what these are from my other guides).
Then, instead of trading higher and breaking out of the harami formation, the market continues by creating lows:
This confirms the original harami failed.
Finally, after these low-creating candlesticks if we see bullish candlesticks form then you should analyse this move further, waiting for these candlesticks to continue and close higher than the bullish harami’s high, as can be seen in this example:
After following the trading sessions since the failed harami, we now have a bullish hikkake pattern that has formed.
This is when the market is primed for a bullish reversal.
What Does a Bullish Hikkake Pattern Really Mean in the Markets?
With the identification of this candlestick pattern now firmly placed in your mind, it’s time to translate what is happened that is causing this price to form such a pattern.
Firstly, the harami candle pattern is caused when there is a sudden increase in buyers, they are able to generate enough pressure to trade the price higher.
In the case of a bullish hikkake candle pattern, however, the bulls don’t have enough volume behind them to continue the move upwards, this is when the bears reclaim the momentum by making new lows.
Now here is where we can gain an understanding of a potential future bullish move:
Once we see the lows generated and the candlesticks start to be bullish again, as per the pattern, then we can take this information as if there is a demand zone around that area – you could validate it by looking at previous near term market structures.
When this happens, we can think that there is a liquidity pool around these lows that have supplied both buy orders and take profits from the previous downtrend.
This area is what gives the kick start to a new bullish trend, and it’s what you will see happen as this pattern develops.
With this type of understanding, you’ll be able to logically think about how the market is reacting and be able to make a more informed decision before placing a trade.
How to Trade a Bullish Hikkake Pattern in 3 Simple Steps
Now we look at what will hopefully turn your analysis into cold-hard cash!
There are a couple of steps that you should follow in order to trade the bullish hikkake pattern, and fundamentally, the key behind this pattern is the formation of a harami pattern.
Let’s go through it, step by step.
Step 1: Identify the Bullish Harami
I’m not going to repeat the exact steps behind this, otherwise, it’ll be a guide within a guide.
Like an Inception of learning.
So do check out the Bullish Harami Pattern guide available here.
If you know how it works, then simply identify it like below:
Step 2: Wait for the bearish candles
Now the first phase of this candlestick pattern has formed – we must wait for what the follow up candles do.
As you can see here, things start to look good as the harami pattern failed and the following trading sessions traded lower (just like we want).
Step 3: Wait for the confirmation
The final candlestick, or price area of concern for us, we need to monitor.
Now, depending on what timeframe you are on you could be waiting a minute or a week for this signal.
So, regardless of timeframe, set an alert at the high of the inside candlestick of the original harami pattern, just like below:
Once the alert has been triggered then we know the pattern has formed allowing a trade to be executed, like in the example below:
Step 4: Execute the trade
I know what you are thinking, why didn’t we just place a pending order instead of an alert?
Well, in my experience patterns are never to be trusted until the price closes.
I’d rather lose 5-10 pips potential extra profit and time it correctly, than risking 20-30 pips on a poor signal.
So in this step, with the signal candlestick closed, we want to place our trade at the high of the signal candlestick like so:
Now, if the market is already trading above that level, you can do three things:
- you can set a pending order and wait to see if the market pulls back.
- You can execute a market order and place the trade instantly.
- You can avoid trading this pattern, but still use the information to look for another future pattern.
Personally, if it’s still trading within 10 pips of the high, I’d enter the market with a market order.
Let’s break the entry down:
Entry Level: High of the signal candlestick
Stop Loss: Low of the signal candlestick
Take Profit: Nearest logical market structure or resistance level.
That’s all there is to place the order – simple, right?
Result:
With the pattern fully formed and it validates a bullish continuation, this is what it will look like:
In this example, it generated a further move upwards and closed out 26 pips profit.
Summary: Bullish Hikkake Candlestick Pattern
In summary, the bullish hikkake pattern is one of the most useful patterns to watch out for.
You can identify it, you can wait for the pattern to develop and then you can trade it.
So, if you found this article useful, please share it.
If you have any questions, please feel free to reach out on social media.
If you are looking for some more useful articles about all candlestick patterns, then check out my list of recommended articles below: