Courtesy of MarketTamer
- The Inverted Hammer is a single session reversal pattern.
- The Inverted Hammer appears at the bottom of a downtrend and is the inverse of a Hanging Man pattern which is located at the top of a trend.
- The upper wick is ideally at least twice the length of the real body with little or no wick to the bottom.
- The pattern is slightly more bullish if the real body is white as opposed to dark.
- A gap down into the Inverted hammer increases the strength of the signal.
- Many times you will see the Inverted Hammer associated and combined with other candles such as a Hammer and/or a Doji that will confirm and strengthen the reversal.
- The relatively long wick to the upside begins to indicate to the bears that buying pressure is stepping in.
- The bears will heed the notice and begin to cover their short positions even though they won the battle temporarily by pushing the stock lower.
- The pattern is validated by a gap up to a bullish follow though session and is further fueled by more short covering.
- Increased volume on the reversal day is also an indication the stock will be changing direction.
What Does It Mean To Be Back Below The 200 SMA?
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