Hikkake Pattern

The hikkake pattern is a short-term technical analysis setup used to anticipate price reversals and breakout moves. Pronounced Hĭ-KAH-kay, it was described by Daniel L. Chesler, CMT, in 2004. The name comes from a Japanese word meaning “hook” or “ensnare,” reflecting how the pattern can trap traders who act on an apparent breakout.

Key takeaways

• Signals potential short-term reversals or continuations after an apparent breakout.
• Exists in two mirror setups: bullish and bearish.
• Begins with an inside-bar (harami) setup, followed by a false breakout and a confirming reversal.
• Works slightly more than half the time; not reliable by itself.
• Best used with risk management and confirmation from other indicators.

How the pattern works

Conceptually, the hikkake starts with a period of low volatility (an inside-bar setup), followed by a breakout that appears genuine but then reverses and moves past the opposite boundary. Traders who enter on the apparent breakout can be “caught” and forced out by stop-loss orders as price reverses.

Four defining steps

1. Two initial bars/candles form an inside-day (harami): the second bar’s body is entirely within the first bar’s body. Size or closing direction is not critical—only that the first overshadows the second.
2. A third bar closes outside the range of the first/second setup — for the bullish setup it closes below the low, for the bearish setup it closes above the high — suggesting a breakout.
3. One or more subsequent bars drift further beyond the third bar and then begin to reverse direction.
4. A confirming bar closes back inside and beyond the opposite boundary of the inside-bar: for bullish setups, it closes above the high of the second bar; for bearish setups, it closes below the low of the second bar. When this occurs, the pattern indicates a likely move in that confirming direction.

Bullish vs. bearish setups

• Bullish: Inside-bar → apparent downside breakout → reversal → confirming close above the second bar’s high.
• Bearish: Inside-bar → apparent upside breakout → reversal → confirming close below the second bar’s low.

Practical example

A typical instance appears in price action for a stock like Microsoft (MSFT): a boxed area highlights the inside-bar followed by a false breakout to the downside, then a reversal and a close above the inside-bar’s high. In many occurrences the pattern forecasts a mild advance afterward, but it does not guarantee direction.

Limitations and trading considerations

• Reliability is modest — slightly better than a coin flip. Use confirmation (volume, trend context, momentum indicators).
• Timeframe matters: pattern behavior can differ across intraday, daily, and weekly charts.
• Employ disciplined risk management: define stops, position sizes, and consider combining the pattern with broader trend analysis.
• Treat the hikkake as a signal to investigate, not an automatic trade trigger.

Bottom line

The hikkake pattern highlights situations where an apparent breakout reverses and a move occurs in the opposite direction. It can help identify short-term opportunities when combined with confirmation and sound risk controls, but it should not be used in isolation.