“In the Wick” is a subtle variation of the Wick Play that focuses on managing risk during continuation setups. While not a standalone pattern, this concept highlights how intraday price action around an upside wick can provide clarity for adding to positions or tightening risk controls. Understanding this nuance will help you supplement your trading strategy with better precision and risk management.

What Is “In the Wick”?

Definition

“In the Wick” refers to price action that occurs after an upside wick is formed in a prior session. The setup occurs when:

1. The stock gaps higher or opens near the previous session’s close
2. Price briefly retraces into the wick during intraday trading but holds key levels (e.g., the gap fill or low of the day)
3. Buyers regain control, pushing price above the wick’s high, signaling potential continuation

Example in Action

• A stock forms an upside wick in the prior session as day traders sell into strength
• The next day, the stock gaps higher but retraces into the wick before reversing upward
• A breakout above the wick high signals a continuation of the trend, offering a low-risk entry or reentry

In The Wick – Example Setup

The Psychology Behind “In the Wick”

Understanding the Dynamics

1. Day Traders’ Profit-Taking: The prior session’s wick often forms as day traders exit positions, creating selling pressure
2. Gap and Intraday Retracement: The gap higher in the next session invites fresh selling, but strong buyers hold the gap, signaling demand
3. Breakout: Buyers overcome sellers as price moves above the wick high, leading to continuation

Why It Works

• Holding the gap confirms buyer strength, while the breakout above the wick signals the start of a new wave of momentum
• It provides a low-risk opportunity to add to positions or enter after confirmation

Using “In the Wick” for Risk Management

Entry and Stop-Loss Strategy

1. Adding to Positions:
   • If you already hold a position, use the breakout above the wick high as a signal to add size
   • Place stops just below the low of the gap or day to minimize risk
2. New Entries:
   • For new trades, enter above the wick high after confirmation
   • Manage risk by setting stops at the low of the intraday retracement or gap fill

Supplemental Use

• Combine “In the Wick” with larger patterns, such as bull flags or bases, for higher conviction trades
• Avoid relying on it as a primary entry signal unless supported by other strong factors

Avoiding Pitfalls in “In the Wick” Trades

Common Errors

• Over-Reliance on the Setup: Treat “In the Wick” as a tool for managing risk or adding to positions, not as a standalone strategy
• Large Wicks: Avoid setups where the prior wick is overly large, as this increases volatility and risk
• Ignoring Context: Ensure the “In the Wick” setup aligns with broader patterns or trends for higher reliability