What it looks like
A fast, strong fall over a few candles. Then a bounce that recovers less than 50% of the fall: if the drop was 300 points, the bounce is under 150. Price then turns down and a candle closes below the low of the first drop. The two lows with a weak bounce between them look like a letter H on the chart.
What it means
A sharp drop shows heavy selling. A bounce that recovers less than half shows buyers had little appetite, and sellers were quick to sell again. When price breaks the low, sellers are in charge and the fall is continuing. It is the opposite of a recovery: a market that never really let the sellers go.
How to trade it
- 1
Measure the first sharp drop and check the bounce recovers less than half of it.
- 2
Confirmation: a candle closes below the low of the first drop.
- 3
Entry: sell at that close.
- 4
Stop: above the high of the weak bounce. Example on US30: drop from 47,300 to 47,000 (300 points), bounce to 47,110, close below at 46,990. Sell at 46,990, stop at 47,130, a 140 point risk.
- 5
Target: the size of the first move from the break, 47,000 minus 300 points, about 46,700.
A close back above the high of the weak pullback.
Where it works best
After news driven or opening drops on indices and gold, where the first fall carries real selling.
WickSpeak finds H patterns automatically and labels them on the candles that made them. Each note explains what it is, how to trade it and that a close above the pullback high proves it wrong. In Playbook you can use it as a condition in a play, alone or alongside other patterns and indicators (any of the 146 patterns can be a condition), and backtest it on past candles with your own costs.
Common mistakes
- Selling during the bounce, before the low has broken.
- Trading it when the bounce recovers more than half, which shows buyers are stronger than the pattern assumes.
- Placing the stop at the low of the drop instead of above the bounce.
Related patterns
Questions traders ask
What is the H pattern in trading?
It is a bearish continuation: a sharp fall, a weak bounce that recovers less than half, then a new low. It shows sellers stayed in control.
Is the H pattern the same as a dead cat bounce?
It describes a similar idea, a weak bounce inside a fall. The H pattern adds clear rules: the bounce must be under half, and the trade only starts on a close below the first low.
Where is the stop on an H pattern?
Above the high of the weak bounce. A close above there means buyers recovered more than the pattern allows.
What is the target?
A common target is the size of the first drop, measured down from the break. Use the next support if it comes first.