As a trader, it might feel like you spend all your time watching the waters and waiting for a signal to “tug at your fishing line.” Although you may have to throw a few fish back to sea along the way, once you spot the Bullish Hook Reversal pattern, you’ll know that you have a winner. A highly reliable signal, this short-to-medium candlestick pattern heralds a reversal in investor sentiment. However, if you want to catch this elusive pattern, you will need to learn (1) what it looks like and (2) what it’s trying to say. For help, use the succinct summary we’ve created below.

Bullish Hook Reversal Pattern

Formation

Since the Bullish Hook Reversal pattern only includes two candles, it is easy to spot and analyze. To identify this tremendously trustworthy signal, look for the following criteria:

First, a downtrend must be in progress. Second, the pattern should be composed of two candlesticks. Third, the second candle must be inside the trading range of the first candle. Fourth and finally, the second candle must have a higher low and a lower high than the first candle. Thus, it will change the color trend from red (or black) to green (or white).

Unlike many other candlestick patterns, which feature one candle “engulfing” the other, the Bullish Hook Reversal’s candles are not very far apart or different in size, making the signal unique.

It is also important to note that the Bullish Hook Reversal has a brother: the Bearish Hook Reversal. If you spot a similar pattern with the opposite formation (an established uptrend followed by two candles, and the second candle has a lower high and a higher low than the first), you may have found the bearish form of the Hook Reversal.

Meaning

Every Bullish Hook Reversal pattern begins with a downtrend, which is evidence of the bears’ control over the market. They’re pushing the price lower and lower until, at the short-term low of the trend, a reversal occurs. The second candle has a higher low and a lower high than the candle preceding it, indicating that the bulls have gained control. With the bulls’ new momentum, an uptrend begins to form.

Lucky for you, the Bullish Hook Reversal is an advanced candlestick pattern, which means that it is very reliable. Despite this, we still recommend that you pair it with other indicators when possible for effective trading strategies. In addition, it’s important to note that Bullish Hook Reversal patterns are most reliable when they occur after a strong and definite downtrend. Finally, for strong results, the second candle should have a high volume.

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To get started, remember to confirm your suspicions by checking that the Bullish Hook Reversal has indeed formed an uptrend. This confirmation will help you make successful choices going forward. Good luck!

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