The Inverted Hammer Candlestick Pattern is what is utilized by technical analysts on charts to identify trend reversals. When bulls, or buyers, exert pressure on the asset’s price to rise, the Inverted Hammer Candlestick Pattern appears on the chart.
This pattern usually indicates a bullish reversal because it is seen toward the end of a downtrend. There are three primary components of this Pattern, there are a short lower wick, a small body, and a long top wick. Although it does not matter, the body is typically either white or green in color.
The Inverted Hammer candlestick pattern represents a situation in which the assets’ price was first pushed downward by the sellers, which was followed by a period of market uncertainty and an increase in the price of the security by the purchasers.
The design has the appearance of an inverted “T” or an upside-down hammer. The upper shadow serves as the head, while the body is the handle of the hammer.
How to Identify an Inverted Hammer Candlestick Pattern
To identify the pattern, you have to look out for the following;
- Look for a downtrend.
- Identify a candle with a small body and a long upper wick.
- Either the lower shadow should not be there, or it should be very little.
- At the lower end of the trading range is where the body should be found.
- The wick should be at least twice the length of the body.
- The small body’s color does not matter, but it can imply a somewhat more bullish or bearish tendency.
