What Is a Kicker Pattern?

A kicker pattern is strategy that is sometimes used to project a shift in the movement of the price of an asset. The pattern attempts to accurately predict when an upward or downward trend in that price movement is about to occur, allowing investors to structure orders to buy or sell that will result in the highest level of benefit from that price movement. Sometimes referred to as a two-bar candlestick pattern, the kicker pattern can aid in understanding a sudden reversal and using that knowledge to protect the interests of the investors.

Identifying a kicker pattern is not always the easiest approach for investors or even market observers. Since the process has to do with identifying trend reversals that will occur quickly and with little to no advance warning, careful attention to market indicators is necessary if the investor is to spot an impending trend reversal. Since the reversal may seem to come on without any real warning, this sometimes creates a situation in which the bulk of investors perceive it as a short-term change that will quickly be righted, with the price more or less following the previous trend. Those who identify the kicker pattern and read it accurately will waste no time submitting orders to buy or sell based on whether the pattern reveals that the price is going up or down.

There are a number of benefits to reading a kicker pattern accurately. If the general trend with an asset’s price has been downward for some time, a sudden reversal would mean the price begins to increase significantly in a short period of time. This provides the chance for the investor to buy low, retain the asset throughout the upward trend, then sell the asset just before the price levels off and begins to decrease once more. In the interim, the investor stands to make a significant profit from ownership of the asset.

When the kicker pattern indicates that the price of an asset is about to cease moving upward and experience a severe drop, the investor will move quickly to sell that asset while it is still demonstrating some upward movement. Doing so not only protects the returns already generated from the asset, but also prevents the possibility of sustaining any losses once the price begins to fall. From this perspective, recognizing the developing kicker pattern can go a long way toward maintaining the value of the investment portfolio.