Hammer Candlestick Pattern
The Hammer is single reversal Candlestick Pattern of Bullish form.
The Hammer is a Bullish and single reversal Candlestick Pattern. Typically found in a bearish market, the Hammer signifies the potential for a market uptrend. The graphical illustration of the Hammer can be found in its name, being seen as something similar to that of an upstanding hammer. Examples of the Hammer Candlestick Pattern can be seen below;
The colour of the hammer and whether the market had close at a higher or lower point than the open is not a criterion for this pattern (both are accepted). Also note that he Hammer candlestick is an inhabitant of a falling market, if the market is not in a downtrend it cannot be defined as a Bullish Hammer. The body of the Hammer will be displayed relatively small in size and positioned towards the top of the range. The upper wick will be fairly small in size, often very little to none. The lower wick will be large in size and at least double in size to that seen of the body. Another important criterion when identifying a Hammer candlestick pattern is for the following candlestick to show an increase in price and a larger traded volume.
Also note that the presence of a Hammer Candlestick does not guarantee an upward trend, being said it can act as a confirmation tool when used with other metrics or a complimentary piece of information. To summarise the above, conditions for the Hammer Candlestick have been listed below;
• The market is in a current downtrend.
• The body of the Hammer is relatively small and towards the top of the range.
• The upper wick is small in size, often very little to none.
• The lower wick is at least double the length of the Candlesticks body
• An increase in price seen in the following Candlestick, accompanied with a larger traded volume.