Definition
Bullish Hammer consists of one candle, appearing at the end of an inclining trend. It is similar to the Bullish Dragonfly Doji formation, but the Bullish Hammer does have a small body.
- Trend: Reversal
- Expected trend: Bullish
- Previous trend: Bearish
- Reliability: Moderate
- Type: Bullish
- Number: 1
Recognition
- The market is in a downward trend.
- A candle with small body is formed under the current trendline. The colour of the body is irrelevant.
- The lower shadow of the candle is two or three times larger than its body.
- There is no (or only a very short) upper shadow.
Interpretation
The market is in a downward trend. After the share opens, the price continues to decrease. However, its direction will reverse: less shares will be sold and the share will close near to the opening price at the end of the day. A long lower shadow is formed. The situation will make the short position owners concerned.
Important factors
When the Hammer candle closes above the opening price (forming a white candle), it will be more beneficial for bullish investors. Bullish Hammer has a less probability of signalling a trend reversal than a Bullish Dragonfly Doji. The reliability of the Bullish Hammer is medium, it must be verified by other sources. The confirmation could come from a white candle with an upward gap or a higher closing price.
