Kicker Pattern vs. Exhaustion Gap: Positives and Negatives

What is the Kicker Candlestick Pattern?

The kicker creation is a change pattern which starts with a candle at direction of the principal trend, followed closely by a gap against the tendency.

Talk about being caught on the defame aspect of this trade should your decision is away.

The layout represents a solid shift in the buyer ‘s attitude in regards to the asset exchange. This typically happens as a result of discharge of essential info about the corporation.

Kicker Candlestick Signals

There are two kinds of kicker candlestick patterns – bullish and bearish.

Bullish Kicker Candlestick Pattern

The bullish kicker candlestick pattern grows throughout bearish cost movement. I understand that’s counterintuitive, but bear in mind the asset gaps at the contrary direction of the principal tendency – thus bullish.

bulish kicker pattern

See the 2 candles of this gap are both bullish respectively. The vital thing to phone out would be that the candles not predominate. That really is vital if supporting the pattern.

Bearish Kicker Candlestick Pattern

The bearish kicker candlestick pattern looks throughout bullish cost motions.

The layout could be that the mirror of this bullish candlestick design and is an excellent indication that the party is finished.

bearish kicker pattern

As you’ve probably figured, that the pattern is entirely the similarly because the bullish kicker, however, upsidedown. This time around both candles of this gap are both bullish and bearish .

Again, see how there was not any overlap between your 2 candlesticks.

Kicker Pattern Candlestick Charting

When you see a bullish kicker pattern onto the graph, you should check out obtain long.

Conversely, should you determine a bearish kicker pattern, then you should check out obtain short.

Bullish Kicker Charting Example

Let’s currently Execute a deep-dive of some True bullish kicker charting case:

bullish kicker trade example

This really is a 5-minute graph of Facebook, that suggests that the store opening on August 26, 2016.

After a reduction, FB completes the trading day having a bearish candle.

The subsequent trading day begins using a massive gap and also a huge bullish candle. The previous candle of the preceding trading day and also the before all else candle after the introduction don’t overlap.

This affirms the validity of a bullish kicker signal within the graph. Because of this sense we start a very long trade after the difference candle.

We put a stop-loss order directly beneath the previous candle of their preceding trading day. This stop-loss order protects us out of some other abrupt cost moves contrary to our trade.

One thing to notice is we started our stance after a huge candlestick. There isn’t necessarily everything defame with this approach, but with such large cost expansion, odds are the asset will go lower before heading higher.

This is essentially what happened in the above example.

You as a trader need to be able to discern when a share is having a normal retracement. Keeping a close eye on volume is a great way to locate healthy retracements, versus a trade you need to close immediately.

Shifting gears back to Facebook – the asset developed a wedge pattern after the huge gap up candle.

As you probably know, the rising wedge pattern has strong bearish sentiment.

We close the long trade with Facebook the moment the cost action closes a candle beneath the support line of the rising wedge pattern. This is shown in the red circle on the chart above.

Bearish Kicker Charting Example

Now that we’ve covered the bullish pattern, let’s dig into the bearish version of the pattern.

bearish kicker trade example

Above is a 1-minute chart of Pandora Media from Aug 30, 2016. The image illustrates a bearish kicker candlestick pattern, which developed after an impulsive uptrend.

The last candle of the upward move is bullish. A bearish gap followed by a bearish candle appears afterwards. This confirms the validity of the bearish kicker on the chart. Therefore, we sell Pandora asset and we place a stop-loss above the pattern top as shown in the image.

The key differential of this example from the previous bullish example is the small size of the gap candlestick.

I personally like this setup, because it allows me to keep a tight stop in the event things go against me on the trade.

Also, if things do go in your favor, you are able to reap more of the benefits on the way down.

As you see the cost enters a bearish trend after the kicker pattern presents itself.

We are able to draw a straight trend line through the tops of the patterns.

We hold the trade until the cost action closes above the blue line.

Kicking Pattern Candlestick vs. Exhaustion Gap

So, how does the kicker pattern measure up to the more commonly found exhaustion gap?

The exhaustion gap consists of a gap in the direction of the trend, formed during low trading volumes. The trend might go on in the direction of the gap for a brief period, before the volume picks up and the cost action reverses.

exhaustion gap

Above is the 5-minute chart of Berkshire Hathaway from Aug 31, 2016.

Stop Looking for a Quick Fix. Learn to Trade the Right Way

Notice that during a downtrend, the asset gaps down with relatively low volume.

The gap and the following decrease represents the last efforts of the bearish believers.

Suddenly, the attitude shifts abruptly and the bulls take control.

Volumes then pick up quickly and the asset changes its direction and begins a new bullish trend.

See that the develop is steady and retraces the entire down move.

If you want to trade this case, you should play it the following way:

exhaustion gap – long example

The blue horizontal line on the chart is the top of the exhaustion gap. You could purchase BRK when the cost action breaks this level with high volume.

You should also use a stop-loss order for your trade. It should be placed beneath the bottom created at the moment of the reversal – red line.

Now that you have a basic understanding of both the kicker and exhaustion gap patterns, let’s have a head-to-head competition between the two patterns.

Exhaustion Gap

Positives:

  • The exhaustion gap is found more frequently in the store when compared to the kicker pattern.
  • Bigger cost moves are created after the exhaustion pattern.
  • The exhaustion gap utilizes trading volume to confirm the validity of the pattern.

Negatives:

  • The trades involved with the exhaustion gap usually take more time.
  • The exhaustion has a lower success rate than the kicker pattern. Many of your exhaustion gap trades will go on in the direction of the primary trend for some period of time. This can often lead to you being stopped out before the trend reverses.
  • The stop-loss is often pretty far from your entry cost. By definition, this increases the risk you are taking on the trade.

Kicker Pattern:

Now let’s review the positives and the negatives of the Kicker pattern.

Positives:

  • The kicker pattern has a higher success rate.
  • The kicker pattern has a specific structure, which reduces the likelihood of you mistakenly identifying the pattern.
  • The stop-loss of the kicker pattern is tighter than with the exhaustion pattern. The sense for this is that the gap jumps in the direction of the reversal. In this manner, your stop-loss will only contain the size of the gap and the last candle of the previous day. In comparison, the exhaustion stop should contain the size of the gap, including the extension, which comes after the gap.
  • The actual kicker trade usually takes a shorter period of time to complete.

Negatives:

  • The kicker is a very rare chart pattern. In this manner, you will have a tough time identifying the pattern.
  • The cost moves after the Kicker are a bit smaller than the ones created by the exhaustion gap. The sense for this is that the exhaustion creates a new trend.

So, what’s the verdict?

Depends on what you hope to obtain out of the trade.

I won’t do this for youpersonally, maybe not still another post where the writer speaks out of both sides in their moutharea.

Drum roll….the Kicker blueprint certainly is the trading alternative comparative to this fatigue gap.

The most important sense behind this could be that the superior success rate of this pattern. For me personally, I really don ‘t deal well with losing (slightly I’m honest).

Conclusion

  • There are a few requirements for the confirmation of the kicker candlestick pattern:
    1. The last candle of the trend needs to be in the direction of the trend.
    2. A gap opposite to the trend should appear next.
    3. The candle after the gap should be bearish.
    4. The two candles prior and after the gap should not overlap.
  • The kicker pattern is a result of rapid switch of forces, which is often caused by a major event.
  • There are two types of kicker patterns based on their potential:
    1. Bullish Kicker Pattern: It starts with a bullish trend with a bullish candle at the end, followed by a bearish gap and a bearish candle.

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