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A Hammer is a single Japanese candlestick pattern.
It is black or a white candlestick that consists of a small body near the high with a little or no upper shadow and a long lower shadow (or tail).
A Hammer candlestick is considered a bullish pattern when formed during a downtrend.
In summary, the Hammer candlestick appears during a downtrend, displays a long lower shadow with a small real body at the top of the range.
The price may be developing a bottom and due for a reversal to the upside.
A Hammer candlestick pattern should meet the following criteria:
- The candle must have either a very short upper shadow or no upper shadow at all.
- The candle’s lower shadow must be quite tall (at least two times as height of the body).
- The candle must form after a clear downtrend.
- The candle’s body should be located at the upper end of the trading range.
- The body’s color is unimportant (though a white candle hints at a more bullish bias).
- The candle should be confirmed the following day, with the price trading above the Hammer’s body.
Don’t confuse the Hammer with the Hanging Man.
A Hanging Man looks identical but only forms at the end of an uptrend, while the Hammer forms after a downtrend.
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