What is the strongest of the 12 major candlestick patterns, or rather the entire list of candlestick signals? The Kicker signal. This signal demonstrates a severe change an investor sentiment. In fact, many investors suggest that if you see this signal then you should go long or short, depending upon whether it is bullish or bearish.
Description
The kicker signal, as stated above, is the most powerful signal of all and it works equally well in both directions whether bullish or bearish. Its relevance is magnified when it occurs in overbought or oversold areas and it is formed by two candles. The first candle opens and moves in the direction of the current trend and the second candle opens at the same open of the previous day (a gap open), and then heads in the opposite direction of the previous day’s candle. The bodies of the candles are opposite colors and this formation is indicative of a dramatic change in investor sentiment. The candlesticks really do visually depict the magnitude of the change.
Criteria
- The first day’s open and the second day’s open are the same.
- The price movement is in opposite directions from the opening price.
- The trend has no relevance in a kicker situation.
- The signal is usually formed by surprise news before or after market hours.
- The price never retraces into the previous day’s trading range.
Signal Enhancements
- The longer the candles are the more dramatic the price reversal is.
- Opening from yesterday’s close to yesterday’s open already is a gap, however gapping away from the previous day’s open further enhances the reversal.
Pattern Psychology
The kicker signal demonstrates a dramatic change in sentiment indicating that something has occurred in order to violently change the direction of the price. Usually a surprise news item is the cause of this type of move. The signal illustrates such a change in the current direction that the new direction will persist with strength for a good while. There is one caveat to this signal however. If the next day prices gap back the other way then many investors would strongly urge you to liquidate the trade immediately. This does not happen very often however when it does you will see many investors get out immediately.
