Understanding the Modified Hikkake

What is the Modified Hikkake?

The Modified Hikkake is an advanced candlestick pattern that refines the traditional Hikkake pattern to provide more accurate signals. It involves a false breakout followed by a reversal, which can signal strong trading opportunities. The pattern typically consists of a false breakout that is then reversed by a significant candlestick.

How is the Modified Hikkake Identified?

The Modified Hikkake pattern is identified by:

1. False Breakout: The price moves beyond a previous high or low, creating a false breakout.
2. Reversal Signal: Following the false breakout, a significant candlestick forms in the opposite direction, indicating a reversal.
3. Confirmation: The pattern is confirmed when the price moves back into the original range after the false breakout.

When to Use the Modified Hikkake

The Modified Hikkake pattern is used to:

• Identify False Breakouts: Recognize when a breakout is likely to reverse, providing opportunities for trading against the false move.
• Signal Reversals: Confirm reversals after a false breakout, indicating potential entry points.
• Avoid False Moves: Filter out unreliable breakouts by focusing on the reversal signal.

Formula Example

To identify the Modified Hikkake pattern:

1. Check for False Breakout: Ensure the price moves beyond a recent high or low but does not continue in the breakout direction.
2. Confirm Reversal: Look for a significant candlestick that moves in the opposite direction of the false breakout.
3. Verify Range Return: Confirm that the price returns to the original range after the breakout.

For example:

• Bullish Modified Hikkake: A false breakout below a recent low is followed by a strong bullish candlestick, indicating a potential reversal to the upside.
• Bearish Modified Hikkake: A false breakout above a recent high is followed by a strong bearish candlestick, indicating a potential reversal to the downside.

Parameters

The parameters for identifying the Modified Hikkake pattern include:

• Data: Defines the type of data to use for the pattern.

  • Value: ohlc
  • Description: The pattern uses Open, High, Low, and Close prices.

• Previous N Candles: Number of preceding candles to check.

  • Default Value: 1
  • Min Value: 1
  • Max Value: 300
  • Description: Checks for the Modified Hikkake pattern in the last N candles.

• Pattern Type: Defines whether to look for a Bullish or Bearish Modified Hikkake pattern.

  • Default Value: :bullish
  • Options: :bullish, :bearish
  • Description: Specifies the type of Modified Hikkake pattern to identify.

Conclusion

The Modified Hikkake candlestick pattern helps traders identify false breakouts and potential reversals. By focusing on the confirmation of the reversal after a false breakout, it provides valuable insights for making trading decisions.