Today I will be talking about the J-Hook Pattern. It’s a bullish continuation pattern that is pretty easily identifiable and highly reliable. This long pattern occurs during all trends (up, down, sideways), thus giving you flexibility in all market conditions. It is also considered a momentum play.
Not only that, if you miss the initial entry point, there is usually a secondary entry point. So whether you catch the pattern in the middle of the “J” or towards the top, there is always an opportunity to profit on the long side using this pattern.
Here’s a diagram that I drew up:
The J-Hook during an uptrend:
-Needs an existing uptrend on strong volume
-Needs a price correction on lower volume (*for the difference between a price & time correction, see diagram at the bottom of the post)
-Will show price bars expanding and volume expanding at pivot
-Initial Entry: a breakout on strong volume above the previous peak
-Secondary Entry: either during the formation of a bull flag/pennant, or on the breakout exiting the flag/pennant.
-Needs a price correction on lower volume (*for the difference between a price & time correction, see diagram at the bottom of the post)
-Will show price bars expanding and volume expanding at pivot
-Initial Entry: a breakout on strong volume above the previous peak
-Secondary Entry: either during the formation of a bull flag/pennant, or on the breakout exiting the flag/pennant.
- – -
The J-Hook during a downtrend:
-Needs existing downtrend that is exhibiting an exhaustion in selling pressure.
-The pivot point is usually marked by multiple doji, hammers, and other reversal candles.
-Volume will generally be higher during the downtrend, but should lighten up when most of the selling is finished.
-Initial Entry: on a strong breakout above major downtrend resistance. Usually, this is marked by a strong gap up on large pre-market volume.
-Secondary Entry: either during the formation of a bull flag/pennant, or on the breakout exiting the flag/pennant.
-The pivot point is usually marked by multiple doji, hammers, and other reversal candles.
-Volume will generally be higher during the downtrend, but should lighten up when most of the selling is finished.
-Initial Entry: on a strong breakout above major downtrend resistance. Usually, this is marked by a strong gap up on large pre-market volume.
-Secondary Entry: either during the formation of a bull flag/pennant, or on the breakout exiting the flag/pennant.
- – -
The J-Hook within a neutral range:
-Needs existing neutral range on light volume.
-Mark a slight dip below the range with slightly increased volume. At this point, you won’t know that it will be a J-Hook.
-The pattern materializes when you see an immediate reversal as it reaches upper resistance pof the neutral range.
-Initial Entry: a breakout above the neutral range on strong volume.
-Secondary Entry: either during the formation of a bull flag/pennant, or on the breakout exiting the flag/pennant.
-Mark a slight dip below the range with slightly increased volume. At this point, you won’t know that it will be a J-Hook.
-The pattern materializes when you see an immediate reversal as it reaches upper resistance pof the neutral range.
-Initial Entry: a breakout above the neutral range on strong volume.
-Secondary Entry: either during the formation of a bull flag/pennant, or on the breakout exiting the flag/pennant.
Here’s an example of today’s neutral range J-Hook pattern ($MBI):
*The difference between price & time corrections:
