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HAMMER


Pattern of Price:

The Hammer candlestick pattern is a bullish reversal pattern in technical analysis. The pattern looks like a hammer and is made out of one candle. The Hammer candlestick pattern forms in a downtrend. It’s considered a market bottom or a support.

Hammer candlesticks form when shares fall from their opening prices due to selling pressure. However, the shares manage to recover most or all of the losses within the trading period.

The fact that prices were able to recover most of the losses throughout the intraday reflects substantial buying interest for technical, psychological, or fundamental reasons. When this happens in a downtrend, it points to a possible bottom or change in trend. As a result, it’s a reversal pattern.

Trading Strategy:

Example 1 – Hammer Candlestick

Example 2 – Hammer Candlestick

 


BULLISH ENGULFING


Pattern of Price:

 

Trading Strategy:

 


INVERTED HAMMER


Pattern of Price:

The Inverted Hammer formation, just like the Shooting Star formation, is created when the open, low, and close are roughly the same price. Also, there is a long upper shadow, which should be at least twice the length of the real body.

After a long downtrend, the formation of an Inverted Hammer is bullish because prices hesitated their move downward by increasing significantly during the day. Nevertheless, sellers came back into the stock, future, or currency and pushed prices back near the open, but the fact that prices were able to increase significantly shows that bulls are testing the power of the bears. What happens on the next day after the Inverted Hammer pattern is what gives traders an idea as to whether or not prices will go higher or lower.

The Inverted Hammer candlestick formation occurs mainly at the bottom of downtrends and can act as a warning of a potential reversal upward. It is important to note that the Inverted pattern is a warning of potential price change, not a signal, in and of itself, to buy.

Trading Strategy:

 

Example 1

Example 2 – inverted HAMMER

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