Kicker Pattern

A kicker pattern is a two-bar candlestick pattern that is used to predict a change in the direction of the trend for an asset's price. This pattern is characterized by a very sharp reversal in price over the span of two candlesticks; traders use it to determine which group of market participants is in control of the direction. The pattern points to a strong change in investors' attitude surrounding a security. This usually occurs following the release of valuable information about a company, industry or an economy.

The kicker pattern is deemed to be one of the most reliable reversal patterns and usually signifies a dramatic change in the fundamentals of the company in question. To traders observing the kicker pattern, it may seem like the price has moved too quickly, and they may wait for a pullback; however, those traders may find themselves looking back and wishing they had entered a position when they originally identified the kicker pattern.

While the kicker patter is generally considered one of the strongest bull or bear sentiment indicators, the pattern is, however, rare. Most professional traders do not rapidly overreact in one direction or another. If, and when the kicker pattern presents itself, money managers are quick to take notice.

The kicker pattern is often regarded as one of the most powerful signals available to technical analysts. Its relevance is magnified when it occurs in overbought or oversold markets. The two candles behind the pattern take on visible significance. The first candle opens and moves in the direction of a 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 prior day’s candle. The bodies of the candles are opposite colors in many trading platforms, offering this formation a colorful display of the dramatic change in investor sentiment. Because the kicker pattern occurs only after a significant change in the market's attitude; the indicator is often studied with other measures of market psychology or behavioral finance.