Single candlestick patterns
Single candlestick patterns
Hammer and Hanging Man
The Hammer and Hanging Man look exactly alike but have totally different meanings depending on past price action.
Both have little bodies (black or white), long lower shadows, and short or absent upper shadows.
The bottom is near and the price will start rising again.
The long lower shadow indicates that sellers pushed prices lower, but buyers were able to overcome this selling pressure and closed near the open.
Just because you see a hammer form in a downtrend doesn’t mean you automatically place a buy order! More bullish confirmation is needed before it’s safe to pull the trigger.
A typical example of confirmation would be to wait for a white candlestick to close above the open to the right side of the Hammer.
Recognition Criteria for a Hammer:
- The long shadow is about two or three times of the real body.
- Little or no upper shadow.
- The real body is at the upper end of the trading range.
- The color of the real body is not important.
The Hanging Man is a bearish reversal pattern that can also mark a top or strong resistance level.
When the price is rising, the formation of a Hanging Man indicates that sellers are beginning to outnumber buyers.
Buyers were able to push the price back up some but only near the open.
A long lower shadow which is about two or three times of the real body.
- Little or no upper shadow.
- The real body is at the upper end of the trading range.
- The color of the body is not important, though a black body is more bearish than a white body.
Inverted Hammer and Shooting Star
The Inverted Hammer and Shooting Star also look identical. The only difference between them is whether you’re in a downtrend or uptrend.
An Inverted Hammer is a bullish reversal candlestick.
A Shooting Star is a bearish reversal candlestick.
Both candlesticks have little bodies (filled or hollow), long upper shadows, and small or absent lower shadows.
The Inverted Hammer occurs when the price has been falling suggests the possibility of a reversal. Its long upper shadow shows that buyers tried to bid the price higher.
However, sellers saw what the buyers were doing and attempted to push the price back down.
