Candlestick Patterns | Bullish Inverted Hammer

Bullish Inverted Hammer

This pattern consists of a black body followed by an Inverted Hammer that is characterized by a long upper shadow and a small body.
It is similar in shape to the Bearish Shooting Star but unlike the Shooting Star, the Inverted Hammer appears in a downtrend and signals a bullish reversal.

How to identify

  1. Small real body formed near the bottom of the price range.
  2. The upper shadow is no more than two times as long as the body.
  3. The lower shadow is small or nonexistent.

Psychology

The long upper shadow and small real body at the bottom of the trading range are cause for concern by the bears. They wonder if this is the end of the downtrend and take measures to protect their gains. If the next day opens above the body of the Inverted Hammer, then expectations could be for shorts to cover and propel a reversal rally.

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