The Kicker pattern is a significant trend reversal candlestick pattern that predicts a change in the sentiment and direction of the market. It is quite a reliable pattern that heralds either a bullish or bearish reversal of the current market direction, depending on the trend it appears in. The Kicker pattern consists of two candlesticks of which the first is supportive of the underlying trend but the second candlestick is a strong indication of a potential reversal of the trend.
A distinctive characteristic of the Kicker pattern is that both candlesticks that make up the pattern are Marubozu candlesticks that open at more or less the same level but move in different directions. It usually occurs after a significant news event related to the underlying security and signals a sharp change in market sentiment for that security.
The Bullish Kicker Pattern
The bullish version of the Kicker pattern should appear in a well-defined downtrend. The market has a very negative sentiment towards underlying security as its price continues to fall. The first candlestick in the pattern is very indicative of the negative sentiment and supportive of the current downtrend as the price closes lower than its open. However, following a significant news event related to the underlying security, the second candlestick all but nullifies the preceding candlestick as it gaps up on open to open at the same level that the previous candlestick opened, or very close to it, and then closes even higher following a positive news release related to an unanticipated improvement in the fundamentals of the underlying security. The second candlestick shows a clear shift in the market sentiment towards the underlying security. Traders now view the underlying security as a good investment following the positive news and could be expected to close their short positions. As such, the second candlestick should not retrace the gains made by the first candlestick in the pattern. Hence, the market should reverse direction and start a new uptrend.
The Bearish Kicker Pattern
The bearish version of the Kicker pattern should only appear in a well-established uptrend where the market has a very positive sentiment towards underlying security. The first candlestick in the bearish kicker pattern is indicative of the positive market sentiment and is supportive of the current uptrend as the price continues climb. However, following a significant news event related to the underlying security, the second candlestick nullifies the preceding candlestick as it gaps down on open to open at the same level that the previous candlestick opened, or very close to it, and then closes even lower following a negative news release related to the fundamentals of the underlying security. The second candlestick shows a clear, negative shift in the market sentiment towards the underlying security. Previously bullish traders should be expected to exit their long positions and, hence, the market should reverse direction as a sell off of the underlying security should be expected.