Hockey Stick Pattern: Meaning, Formation and How to Trade It

Stock markets don’t only go up. The share price could remain flat or rise slowly over a long period before suddenly jumping higher. Sometimes this type of price action can form a chart pattern that looks like a hockey stick, which is why it is known as the hockey chart pattern.

The pattern can assist traders and investors in identifying a likely shift from a sluggish pace to a period of significant upward momentum. The shape may seem simple, but it is vital to understand the rationale behind the change.

This article explains what the hockey chart pattern is and how to trade it.

Key Takeaways

• It usually has a flat or steadily increasing trend with a strong upward movement.
• The early phase could be a consolidation or a slow price appreciation.
• The steep surge may suggest considerable purchasing demand and building momentum.
• Volume might help demonstrate that the rising move is well-supported; a well-supported pattern should not be used in isolation to make a trading decision.
• Risk management remains necessary, as sharp rallies can reverse just as swiftly.

What Is the Hockey Chart Pattern?

The hockey chart pattern is a pricing pattern in which an asset does not move sideways or slowly up for a period before it experiences a sudden upward movement.

This pattern is named this way because the price movement can look like a hockey stick:

• The handle is the protracted period of flat or gradual price movement.
• And the blade is the sharp upward ascent.

The pattern can be seen in stocks, indexes, or other financial instruments. You typically see a period of low momentum followed by a sudden spike in buying enthusiasm.

A hockey pattern does not mean the price will go higher. It simply refers to a specific form of price action.

Unlike more established chart formations such as the head-and-shoulders or cup-and-handle, the hockey stick is not a formally defined, rules-based pattern within classical technical analysis. It's better understood as a descriptive visual metaphor, one that is widely borrowed from business, economics, and growth forecasting to describe a long flat stretch followed by a sudden sharp rise.

The Pattern:

The Handle

The first and usually longer section of the pattern is the handle.

During this phase, the price could:

• Move sideways
• Rise slowly
• Trade in a limited range
• Show limited momentum

This stage could be a sign that the market is waiting for a new trigger. The buyers and sellers may be fairly evenly matched, which might help keep price movements moderate.

The Blade

The blade is the pointy upper section of the design. At this point, the price begins to grow much more quickly than previously.

This movement can happen due to:

• Strong company results
• Good news for the industry
• A big announcement
• More investor interest
• A breakout of a main pricing range
• Strong buying pressure

The steep increase is the top of the hockey stick.

Why Does the Hockey Stick Pattern Form?

Market conditions alter, and a hockey chart pattern might develop during a long period of sluggish price action.

The asset may not attract much interest in the first stage. Neither buyers nor sellers have complete control; therefore, the price could remain in a tight range.

A positive trigger, however, can modify this. A company might, for example, report great results or win a large business contract. This might boost demand for the shares and bring in new buyers.

The price may climb above the range and increase more rapidly, with demand surging.

Sometimes, speculation can also drive the move. That’s why it’s crucial to understand why the price is growing, as opposed to just following the shape of the chart.

How to Spot a Hockey Chart Pattern

The pattern is determined by observing a clear change in the speed and direction of price movement.

Step 1: Find a Long Quiet Phase

The price should show sideways or gentle fluctuations for a while. The move doesn't have to be precisely flat. Also, the handle of the pattern can be a sluggish uptrend.

Step 2: Calculate the Change in Momentum

Look for a time when the price starts to accelerate upward. This is where the pattern changes from the handle into the blade.

Step 3: Wait for a Breakout

A break above the recent trading range or resistance levels can be an indication of increased buying pressure. The breakout would be a stronger sign that the market is behaving differently.

Step 4: Look at Trading Volume

Increased trade volume during the steep climb can suggest more market activity. A very low-volume price gain may suggest caution, since it may lack broad support.

Step 5: Look at the Overall Trend

The pattern should also be observable in the larger market environment.

A hockey pattern that occurs inside a strong general market trend may react differently to a hockey pattern that occurs in a weak or highly volatile market.

A Simple Illustration

Suppose a stock trades in a range of ₹95 to ₹105 for a couple of months. The price moves slowly and forms the handle of the pattern throughout this period.

Then the corporation reports better-than-projected performance. The share rises above ₹105 as buying demand picks up.

Price goes up to ₹120, then ₹135, and ultimately ₹150 over the next few weeks. The prior sideways movement, then a quick upward move followed by an upward-pointing shape, is an example just to show the pattern. Price movement in actual markets is not necessarily a perfect hockey stick.

How Traders Can Use the Hockey Chart Pattern?

The hockey pattern can be used by traders to identify a potential change in momentum. One way to do this is to look for a breakout out of the prior consolidation range.

A trader may want to see more confirmation, such as:

• Increased trade volume
• A closing above a key resistance level
• Price keeps rising following the breakout
• Other technical indicators support

Some traders may not want to jump in following a high surge. They could be waiting for a drawback or retest of the breakout level instead.

This can keep you from getting in at an exceptionally high price during a quick surge.

Why Volume Matters

Volume might provide valuable information when analyzing the hockey chart pattern. A price increase accompanied by an increase in trading volume may suggest greater buying interest.

However, if the price jumps significantly without a jump in volume, traders may wish to take a closer look at the move. Volume does not ensure a trend will continue, but it might give context.

Hockey Pattern vs Regular Uptrend

An uptrend is normally established in a series of higher highs and higher lows.

The hockey pattern is different in that it generally has a very distinct change in the speed of the price movement.

Feature	Hockey Pattern	Normal Uptrend
Early movement	Flat or slow	Gradually rising
Change in momentum	Often sudden	Usually more gradual
Shape	Hockey stick-like	Steady upward trend
Price movement	Sharp acceleration	Higher highs and higher lows