FISH HOOK CHART PATTERN

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FISH HOOK CHART PATTERN:

The fish hook chart pattern is a technical analysis pattern that appears in the price charts of financial assets such as stocks, currencies, and commodities. It is a rare pattern that is characterized by a sharp price move followed by a sharp reversal. The pattern consists of two distinct price movements:

The hook: This is a sharp price move that is usually driven by a sudden change in market sentiment or a news event.
The reversal: This is a sharp reversal in the price trend, which is usually caused by profit-taking or a countervailing news event.

The fish hook chart pattern is completed when the price reverses and moves back in the direction of the original trend. This reversal is considered a buy or sell signal, depending on the direction of the original trend. It’s important to note that the fish hook chart pattern is not always a reliable indicator of a price trend reversal.

It’s always a good idea to use other technical and fundamental analysis tools to confirm any potential trade signals generated by the fish hook chart pattern. A fish hook formation is named because of the shape of the indicator as it forms in the chart. 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. A fish hook Chart Pattern cannot happen when the subject indicator is extremely high or extremely low (deeply negative) levels. If the activity is excessive, a more suitable explanation than the ordinary “fishhook” conduct is more applicable. When they occur at or close to neutral, fishhooks perform better. When prices still have a significant amount of room to decline, the best ones are identified halfway between a high level and neutral. The classic instance of this idea was the rally that fell short in early October 1987.

A fish hook Chart Pattern is fundamentally a futile attempt to change a trend. The bulls may make a feeble attempt to change direction and get prices moving higher once a fresh downturn begins. The fishhook symbolizes the futility of that endeavor. Although bearish fishhooks (on the way down) are significantly more potent and hence concerning, inverted fishhooks also happen in the historical record and have a bullish meaning.

It is also important to remember that not all fishhooks have the sinister significance that the structure suggests. Some simply fail. In this regard, fishhooks are imperfect, just like every other indication or market event. We’ll need to be sure to dedicate a whole chapter to fishhooks when we finally get around to publishing Patterns For Profit’s follow-up.

HOW TO TRADE FISH HOOK CHART PATTERN?

The fishhook chart pattern is a bearish reversal pattern that is formed by a long bullish trend followed by a series of higher highs and higher lows, before finally breaking down to a new low. To trade the fishhook pattern, you should wait for the pattern to form and then enter a short position as the price breaks through the low of the pattern.

It is also important to set a stop loss above the high of the pattern, as this will limit your potential losses if the trade does not go in your favor. Additionally, you can also look for confirmation of the pattern by using other technical indicators such as the Relative Strength Index (RSI) or Moving Averages (MA) Note that technical analysis is not a full proof approach and should be combined with fundamental analysis, especially when trading in commodity markets.