The Strike Market Pattern - An Interesting Reversal Detection Tool
Smart Market Patterns for Reversal Detection
Markets may look chaotic on the surface, but patterns often emerge beneath the noise. Recognizing these patterns can give traders and investors an edge—if they know what to look for. This article discusses a less known market pattern called the Strike.
Pattern Recognition
Market patterns are recurring behaviors or movements in price that help make sense of what’s happening—and what might happen next. Even though markets can seem unpredictable, they often move in ways that reflect the emotions and decisions of the people involved: excitement, fear, optimism, and panic
One of the most basic patterns is a trend. This is when the price of a stock or other asset moves consistently in one direction—either up (called a bullish trend), down (a bearish trend), or sideways. Identifying a trend early can help someone ride that momentum, but it’s just as important to know when a trend is losing steam. Another key concept is market cycles. These are longer-term patterns tied to things like the economy, seasons, or company earnings. For example, retail stocks often rise during the holiday season, while energy prices might follow supply and demand patterns throughout the year.
Chart patterns are visual formations on price charts that repeat over time. They have names like head and shoulders, flags, or double bottoms. While they might sound technical, they’re just ways of identifying shifts in supply and demand. Alongside these patterns, it’s important to pay attention to volume—the number of shares or contracts being traded. If a price change is happening with high volume, it usually means more conviction behind the move. On the other hand, low volume might suggest hesitation or a lack of real interest.
Some patterns are purely based on price and others are based on a combination of pricie and price-derived indicators. The Strike pattern is the latter. Let’s see how.
Do you want to master Deep Learning techniques tailored for time series, trading, and market analysis🔥? My book breaks it all down from basic machine learning to complex multi-period LSTM forecasting while going through concepts such as fractional differentiation and forecasting thresholds. Get your copy here 📖!
The Strike Pattern
The Strike pattern is a structured configuration that makes use of the HLC (high, low, and close) price and a 5-period moving average. It’s supposed to detect intermediate reversals. Here are the condtions of the pattern:
A bullish signal is generated whenever the last three lows are below the 5-period moving average of each respective period while the close prices above the moving average. Additionally, the close price must be above the close price from 13 periods ago.
A bearish signal is generated whenever the last three high are above the 5-period moving average of each respective period while the close prices below the moving average. Additionally, the close price must be below the close price from 13 periods ago.
The previous chart shows a signal chart with a few market patterns detected. Take a look at the following chart as well.
Use the following code in TradingView to generate the market pattern on the chart.
// This source code is subject to the terms of the Mozilla Public License 2.0 at https://mozilla.org/MPL/2.0/
// © Sofien-Kaabar
//@version=5
indicator('The Strike Pattern', overlay = true)
last_mean = ta.sma(low, 5)
buy = low < last_mean and close > last_mean and low[1] < last_mean[1] and close[1] > last_mean[1] and low[2] < last_mean[2] and close[2] > last_mean[2] and close < close[13]
sell = high > last_mean and close < last_mean and high[1] > last_mean[1] and close[1] < last_mean[1] and high[2] > last_mean[2] and close[2] < last_mean[2] and close > close[13]
plotshape(buy, style = shape.triangleup, color = color.green, location = location.belowbar, size = size.small)
plotshape(sell, style = shape.triangledown, color = color.red, location = location.abovebar, size = size.small)
It’s important to remember that no pattern is a sure thing. Sometimes they work; sometimes they don’t. Markets are influenced by news, unexpected events, and the psychology of the crowd. That’s why beginners should never rely on patterns alone. Use them as a guide, not a guarantee, and always manage your risk.
Every week, I analyze positioning, sentiment, and market structure. Curious what hedge funds, retail, and smart money are doing each week? Then join hundreds of readers here in the Weekly Market Sentiment Report 📜 and stay ahead of the game through chart forecasts, sentiment analysis, volatility diagnosis, and seasonality charts.
Free trial available🆓
