A Hammer is a single candlestick pattern that forms at the bottom of a downtrend and signifies a potential reversal in the price action. It has a small body at the top with a long lower shadow, resembling a hammer, hence the name. Vice Versa for Reverse Hammer (aka Shooting Star).
(Fig 1.2 - Hammer and Reverse Hammer)
The Hammer pattern indicates that despite the sellers' dominance during the trading session, they lost control at some point and the buyers were able to push the price back up. This would mean that a reversal to the upside may be imminent resulting from a shift in momentum from bearish to bullish.
Longer the lower shadow, stronger the Hammer.
A Hammer forming at support offers additional confirmation and makes the pattern stronger.
Vice versa for Reverse Hammer pattern as mentioned above.
Please click on "Next Post" to move to the next pattern - Bullish Engulfing or Bearing Engulfing Candle.
This is Green hammer example which shows potential uptrend in a continuing declining trend
We may also have a Red Hammer in uptrend which will then show potential downtrend.
And vice versa for Green reverse hammer in downtrend