Understanding The Hockey Stick Chart Pattern
Technical trading is an exciting world. Traders enjoy the adrenaline rush when they spot specific patterns in their trading charts as these formations mean unique trading opportunities. Hockey stick chart pattern is one such formation, characterised by a sharp increase that follows a short period of inactiveness – makes the pattern resemble a hockey stick. The pattern signifies a dramatic rise in the value of stocks after a short period of stability. Here we will discuss what it means, how to identify a hockey stick, and how to take a position when it appears. So, read on.
What Is A Hockey Stick Chart?
Hockey stick chart is a line chart where a line, joining the data points, resembles a hockey stick. It indicates a short period of stability, followed by a dramatic rise. It contains a tip, an inflection, and a long shaft. It is easy to spot because of its unique features. Traders often look for it while assessing companies’ performance metrics, such as a rise in sales volume or revenue, which can eventually impact the share price.
Hockey stick pattern is typical in scientific research, environmental studies, statistical research, and more. In the business world, you can see a hockey stick pattern in company sales or revenue chart. It is a unique pattern and demands immediate attention.
The line connecting the data points, represents a period of inaction, where the growth is slow. The inflection is a curve that marks the initial burst of growth, followed by a long shaft, representing sustainable and rapid progress.
Interpreting The Hockey Stick Pattern
A hockey stick pattern helps traders guess a shift in the company’s performance, which will impact its share price. A rise in company sales or revenue will increase demand for its stocks in the market, offering an opportunity for traders.
Is The Hockey Stick Right To Score A Goal?
Hockey stick pattern is persuasive formation. Many traders open a long position when they spot the hockey stick. If it is an upward rising hockey stick, indicating a rise in company sales volume, you can open a long position with a spread or CFD (contract for differences).
CFD is a way of speculating in the market without dealing with buying or selling of any underlying asset.
Hockey stick chart pattern is familiar in lab research, but it also has implications in the world of trading. An upward rising hockey stick is a strong indication of robust performance by the company and therefore, traders look for hockey stick forms while analysing company’s financial statements.