Kicker Signals – Bearish

Kicker Signals – Bearish

Kicker signals are the most powerful signals of Japanese Candlesticks and they indicate a severe change in investor sentiment. This signal is most relevant when it occurs in the oversold or the overbought area as it works equally well in either direction (bullish or bearish). This two candle pattern is formed by two candles of opposite colors with the first candle (green or white) opening and moving in the direction of the current trend. The second candle (red or black) then opens at the same open of the previous day and it then heads (a gap open) in the opposite direction of the previous day’s candle. When observing bearish kicker signals you will see the first candle open and move in the direction of the current up trend. (There is typically little or no upper wick when seeing this signal). Then the second candle opens at the same or close to the open of the first candle (gapped down), and it moves in the opposite direction.

When observing kicker signals of a bearish nature, you must look for specific criteria. First, you will notice that the price never retraces into the previous day’s trading range. Second, the price movement is in the opposite direction from the opening price and the first day’s open and the second day’s open are the same. Third, the trend is irrelevant for this signal. Lastly, the signal typically occurs as a result of surprising news, released before or after market hours, that affects investor sentiment. A bearish signal of this nature indicates very strong selling.

There are also instances in which bearish kicker signals are strengthened. First of all, you should look for longer candles, which make the reversal more dramatic. Second of all, you should look for the signal to gap down from the first day’s open as this further increases the probability of a reversal. What this means is that when the second day’s opening is at the exact same point as the first day’s opening instead of near its closing, this increases the probability of a reversal.

What do bearish kicker signals indicate is happening in the markets?
As previously discussed, this signal illustrates a dramatic change in investor sentiment due to surprising news that changes the direction of the price. A true kicker signal demonstrates such a drastic change in direction that the new direction will continue with significant strength for a good period of time. Investors must use caution if using this signal to go short or long, however because if the next day the prices gap back the opposite direction, then the investor must close out of the trade immediately. This does not happen very often, but if it should, investors must get out quickly.

Japanese Candlesticks are patterns that are easy to recognize and are the perfect technical analysis tool for new investors. There are additional signals such as the doji candlestick chart, the inverted hammer candlestick, the evening star candlestick, and the candlestick piercing pattern. Each signal is described and includes a brief description of what each signal indicates is happening in the markets. Additionally, you can find more definitions regarding the stock market by checking out the stock market glossary.

Once you are familiar with the 12 major candlesticks signals you can then continue your Japanese candlesticks education and learn how to identify the secondary candlestick patterns.