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Why is a Kicker signal so important?




Candlestick signals are excellent at providing high probability reversal indicators. They work on the basis of displaying the emotional battle going on in the security. The dynamics between supply and demand is varies because of change in investor perception towards the stock. This change in perception is what causes stocks to fluctuate like they do.

What a candlestick trader is looking for in a chart is the clear display of emotional enthusiasm entering a stock. This enthusiasm usually will carry the stock in its direction for a period of time. This period could be months, weeks or sometimes days. The trader is looking to capitalize on that time period. The Kicker signal is the most clear visual depiction of a change in investor psychology.

On day one of the signal, the stock closes lower than its open creating a black bearish candle. The bears obviously controlled the position on this day. However the next day, the gap up above the previous open and a tall bullish candle clearly suggests some dramatic change occured in the perception towards the stock. This will usually create a strong uptrend until the sentiment wears out again. As a trader, one needs to take advantage of this high probability scenario.

The following chart of ITT Educational Services, shows a Kicker signal. Note the rally of the stock from 96 to 120 following the signal. Traders who are not familiar with candlestick signals will not get in this type of trade. They will be concerned due to the large gap up and miss this splendid opportunity. Candlestick traders will realize what this signal means and will have the confidence to get in the trade.

Chart courtesy

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