Hammers are some of the most popular and easily recognisable patterns in candlestick analysis. They can be a powerful and bullish reversal signal. The hammer is probably best defined as being a signal that comes at the end of a phase of selling pressure.
After the open, the price falls to hit a new low, before a strong intraday rally and a price close at or around the high of the candlestick. The price is “hammering” out a recovery form a low. The price then continues higher in the next candlestick and the reversal takes hold.
Inverted Hammers are also bullish reversal candlesticks (although they are considered to be low conviction candlesticks). The price opens at or near the session low before an intraday rally. Although the rebound is unable to hold up before a falling back, the close of the candlestick is above the open. It signals that a reversal could be forming.
Using Inverted Hammer signals
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