The Kicker Signal candlestick pattern is a two-candle reversal pattern that signals a strong change in market sentiment. It is formed by a long candlestick in the opposite direction of the previous trend, followed by a gap up or down and a second long candlestick in the same direction as the first.
KICKER
SIGNAL
KICKER Description
The
Kicker Signal in Figure 2.43 is the most powerful signal of all. It works
equally well in both directions. Its relevance is magnified when occurring in
the overbought or oversold area. It is formed by two candles. The first candle
opens and moves in the direction of the current trend. The second candle opens
at the same open of the previous day, a gap open, and heads in the opposite
direction of the previous day's candle. The bodies of the candles are opposite
colors. This formation is indicative of a dramatic change in investor
sentiment. The Candlesticks 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 days trading range.
Signal Enhancements
- The longer the
candles, the more dramatic the price reversal.
- 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 the investor sentiment.
Something has occurred 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. If the next day prices gap back the other way,
liquidate the trade immediately. This does not happen often, but when it does,
get out immediately. (See
Figure 2.44.)