Hook Reversal

Hook Reversal

What it is

A hook reversal is a short-term candlestick pattern that signals a possible reversal in price direction. It appears when the second candlestick of a sequence has:
* a higher low and a lower high than the previous candlestick, and
* an opposite color (the body closes on the other side of the open compared with the prior candle).

Unlike engulfing patterns, the second candle in a hook reversal does not need to be much larger than the first — the body can be relatively small and still qualify.

How it works

Hook reversals indicate a shift in control between buyers and sellers within a single session:
* Early action follows the prevailing trend (e.g., bulls in an uptrend).
* Later in the session the opposite side reclaims control and pushes price toward the other extreme of the prior candle.

Because hook reversals are visually simple and occur relatively often, they are popular with active traders. However, their frequency also produces many false signals, so reliability depends on context — strength of the preceding trend, volume, and confirming indicators or chart patterns.

Relationship to other candlestick patterns

• Harami / Engulfing: Hook reversals are often classified near harami or engulfing patterns because the second candle’s body is contained within the prior body. The key difference: harami/engulfing typically emphasize larger size differences and are generally less frequent but more reliable.
• Dark cloud cover: Similar in structure when both real bodies are comparable in length, but dark cloud cover typically requires a more pronounced move.

Bullish vs. Bearish examples

• Bearish hook reversal (at the top of an uptrend)
• The second candle opens near the prior candle’s high but closes near its low — bulls lead early, then bears push price down.
• Bullish hook reversal (at the bottom of a downtrend)
• The second candle opens near the prior candle’s low but closes near its high — bears lead early, then bulls push price up.

Trading considerations

• Confirmation: Use additional technical tools (trend analysis, support/resistance, moving averages, momentum indicators, volume) to confirm the reversal.
• Risk management: Set stop-loss and take-profit levels based on broader technical structure — the pattern alone does not indicate the size of the ensuing move.
• Expect false positives: Because hook reversals are common, require confirmation before committing significant capital.

Key takeaways

• A hook reversal is a short-term candlestick reversal signal where the second candle shows a higher low and a lower high relative to the previous candle and flips color.
• It is similar to harami or engulfing patterns but usually involves smaller body-size differences.
• Useful for active traders, but should be confirmed with other analysis and managed with clear stops and profit targets.