What is the hammer pattern?
The $17 Stock Trading System. Online Option Trading.
The hammer pattern is a candlestick pattern that offers a bullish buy signal for the given security. This pattern will come at the end of a large number of down days.
In order for this pattern to be a bullish signal it needs to come after weakness in the stock. If the stock has not been going down this might not offer a bullish signal.
The hammer is the last candlestick in the picture. It occurs when the markets open up and start going lower like they did the days before. This time however the bulls fight back and start pushing the stock upward.
The day finishes up and that is a signal that the bears have lost power and the bulls have gained streagth.
tip If the hammer pattern does not occur after a downward movement it may not be a bullish signal. In fact if this pattern forms during a bullish ralley it might actually be a hanging man or a bearish signal.
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