Hikkake Modified Pattern

The Hikkake Modified pattern is a less frequent variation of the basic Hikkake pattern and is seen as a reversal pattern.

The concept of the modified version is similar to the basic version, except that a "context bar" is used before the inside price bar/candlestick.

Therefore, the modified version consists of a context bar, an inside bar, a false move, followed by a move above (bullish) or below (bearish) the high or low of the inside bar, respectively.

The hikkake pattern is named after a Japanese verb meaning "to trap", but Western traders may refer to the pattern as an "inside day false breakout".

The pattern consists of two price bars where the first price bar has a lower high and a higher low than the previous price bar.

From here, two versions of the hikkake pattern can develop, a bullish version and a bearish version.

• If the price bar following the inside bar has a higher high and low, this sets up a potentially bearish pattern. A short entry, or sell, is placed just below the inside day's low.

• If the price bar following the inside bar has a lower high and lower low, this sets up a potentially bullish pattern. A buy order is placed just above the inside day's high.

• If a bearish hikkake pattern triggers a short position, a stop loss can be placed above the pattern's high.

• If a bullish hikkake pattern triggers a long position, a stop loss can be placed below the pattern's low.

The modified hikkake requires the following characteristics of the price bar immediately preceding the inside bar:

• A close at the top of the intraday range for bearish patterns and at the bottom of the intraday range for bullish patterns.

• Has a smaller range than the range of the previous bar.