Hook Reversal

DEFINITION of 'Hook Reversal'

A short-term candlestick pattern, occurring in either an uptrend or a downtrend, that is used to predict a reversal in the trend's direction. The pattern is identified when a candlestick has a higher low and a lower high compared to the previous day's candlestick. This pattern is unique because the difference in size between the first and second bar's body is small, compared to that seen in other types of engulfing patterns.

BREAKING DOWN 'Hook Reversal'

If this pattern is found in an uptrend, then the open must be near the prior high, and the low must be near the prior low. This pattern is often classified as a type of harami position because the real body of the second candle forms within the body of the previous candle. It should be noted that the reversal suggested by this pattern is considered to be more significant if it is identified within a strong trend.

RELATED TERMS
  1. Rising Three Methods

    A bullish candlestick pattern that is used to predict the continuation ...
  2. Falling Three Methods

    A bearish candlestick pattern that is used to predict the continuation ...
  3. Evening Star

    A bearish candlestick pattern consisting of three candles that ...
  4. Outside Reversal

    A price chart pattern in which a security's high and low prices ...
  5. Bullish Harami

    A candlestick chart pattern in which a large candlestick is followed ...
  6. Bearish Abandoned Baby

    A type of candlestick pattern that is used by traders to signal ...
Related Articles
  1. Trading

    Advanced Candlestick Patterns

    Go beyond the basics! Learn to identify and trade island reversals, kicker patterns and more.
  2. Trading

    Using Bullish Candlestick Patterns To Buy Stocks

    These five popular candlestick chart patterns signal a bullish reversal in downtrend.
  3. Trading

    Star Formations Spotlight Luminary Trades

    Morning, evening and doji stars will have you basking in better trading profits.
  4. Markets

    The 5 Most Powerful Candlestick Patterns (NUAN, GMCR)

    Statistics show unusual accuracy for the buy and sell signals of certain candlestick patterns like abandoned baby, evening star, and three black crows.
  5. Trading

    The Basic Language Of Candlestick Charting

    If you want to use candlestick charting to get a sense of where a stock is headed, you need to learn how to read this unique charting language.
  6. Trading

    Candlesticks And Oscillators For Successful Swing Trades

    Take advantage of short-term price moves by pinpointing reversals.
  7. Trading

    Most Commonly Used Forex Chart Patterns

    These chart patterns provide entries, stops and profit targets that can be easily seen.
  8. Trading

    Analyzing Chart Patterns: Conclusion

    By Chad Langager and Casey Murphy, senior analyst of ChartAdvisor.com This introduction to chart patterns has provided a broad overview of chart pattern analysis and several of the largest patterns. ...
  9. Trading

    Candlestick Charting: What Is It?

    Discover the components and basic patterns of this ancient technical analysis technique.
  10. Trading

    How To Interpret Technical Analysis Price Patterns: Triple Tops And Bottoms

    Triple and double tops and bottoms may be tough to spot, but once you learn them, they can be powerful patterns.
RELATED FAQS
  1. How do I implement a forex strategy when spotting a Rising Three Methods Pattern?

    Learn how to implement a forex trading strategy designed to profit from a trend continuation signal given by the rising three ... Read Answer >>
  2. How do I build a profitable strategy when spotting a Star pattern?

    Learn how to implement a profitable trading strategy based on the occurrence of either the morning or evening star candlestick ... Read Answer >>
  3. How do I implement a forex strategy when spotting a Star Pattern?

    Learn a simple forex trading strategy designed to take advantage of market reversal indications given by three star candlestick ... Read Answer >>
  4. Are continuation patterns most useful when looking at Candlesticks?

    Learn the basics of using candlesticks to confirm continuation or reversal patterns and the vital role this plays in establishing ... Read Answer >>
  5. How are Piercing patterns interpreted by analysts and traders?

    Understand the candlestick piercing pattern and the common interpretation of market reversal assigned by traders and market ... Read Answer >>
  6. How do I Implement a forex strategy when spotting a Morning Star pattern?

    Learn how to design a forex trading strategy to use for trading the morning star candlestick pattern, an indicator of a bullish ... Read Answer >>
Hot Definitions
  1. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  2. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  3. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  4. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
  5. Weighted Average Life - WAL

    The average number of years for which each dollar of unpaid principal on a loan or mortgage remains outstanding. Once calculated, ...
  6. Real Rate Of Return

    The annual percentage return realized on an investment, which is adjusted for changes in prices due to inflation or other ...
Trading Center