Spotting the J-Hook pattern is easy because it looks like the letter “J”. This pattern is part of up-trending price action that takes a little dip before resuming the trend. The key is to look for three or four candlesticks that have lower highs because this may be the beginning of the J-Hook pattern. Then the price will stop moving down and start moving sideways. The lows of the candlesticks in this part of the J-Hook pattern stay in the same range. You can literally draw a box around the candlesticks that form the bottom of the J-Hook. Price then starts to move higher and breaks up and out of the sideways price action. It continues and then breaks outs from the price high at the start of the J-Hook pattern. This breakout from the price high confirms the J-Hook pattern and signals a buying opportunity. The uptrend then resumes and price moves higher.
Five Stages of the J-Hook Pattern
There are five stages to the J-Hook Pattern
- Price is moving higher in an uptrend fashion.
- Price pulls back and forms three or four candlesticks with lower highs.
- Price stops moving lower and finds support. There are usually two or more candlesticks the stay in the same price range and hold the lows.
- Price moves higher and resumes the uptrend. This looks like a series of candlesticks with higher lows.
- Price then breaks out to complete the J-Hook pattern. This is the first candlestick in the resumed uptrend to close above the high candlestick prior to the pullback.