Inverted Hammer in Candlestick Reversal Pattern

  • An inverted hammer is a single candlestick bullish reversal pattern. The pattern appears after a sustained down-trend.
  • At the beginning of the day there should be a gap-down opening. However, bulls should push the price higher during the course of the day.
  • Eventually the bears should push the price lower during the course of the day and close near the open price.
  • The resulting candle should have a small body, red or green, the upper wick should be at least twice the body of the candle and the lower shadow should be quite small or negligible in size.
  • If the body is green it is relatively bullish than if it is red. This looks like an inverted hammer as the name suggests.
  • The philosophy is that bears were not able to push the price below the opening price during the course of the day.
  • This pattern, however, is considered to be little less bullish than the hammer itself, because in hammer bulls are able to force a higher close by the end of the day.
  • The confirmation of the pattern comes once the price moves above the high of the candle.
  • On confirmation a buy trade can be initiated with a stop loss below the low of the candle.
  • Inverted hammer occurs little less frequently in market as compared to hammer pattern.

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