Hammer |
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Pattern: reversal
Reliability: low/moderate
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Identification
A small real body forms at the upper end of a trading range with a long
lower shadow (the longer the more bullish) with no, or almost no upper shadow.
The Psychology
In a downtrend or within a pullback of an uptrend, a sharp intraday sell-off
is followed by a reversal which causes the stock to close near its opening
price near the day’s high. This hints at the possibility of a reversal.
Bulls most likely were shaken out by the intraday weakness, and shorts
start getting a little worried with the bounce. The pattern is a slightly
more reliable if the real body is white, but a strong following day on
solid volume is still needed to confirm the pattern.
The bullish Hammer is similar to the bullish Dragonfly Doji, bearish Hanging
Man, and bearish Dragonfly Doji.
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