Inverted hammer
The inverted hammer is a bullish reversal pattern. It can be a powerful way to help predict market movements for a given security.
This candlestick will come after one or more big drops in the market. What happens during this day is the market gaps down and opens up lower. Once it opens it will rally up. By the middle of the end of the day however the bears were able to come in and push the stock down.
It should close near, but not below the open of the day. This day marks that the trend might be reversing.
Why does an inverted hammer work? When the bulls rally in the beginning of the day it marks that there is bullish pressure for this stock. Also the fact that the bearish pressure was not able to pull the stock below the open for the day also shows that the bears are getting weak.
Tip This pattern could just be a simple pullback. In fact some traders will wait for the stock to open higher before they decide to take this pattern seriously. If the next day is an up day it will form a morning star pattern, which is a more accurate chart pattern.This pattern works well when combined with other indicators like support and resistance. Other Candlestick Patterns By learning the different candlestick patterns you are helping to set yourself up for success in the stock market. Here are a few more patterns. Morning Star - Basically a confirmation of this pattern. Bearish Tri Star - A bearish pattern usually occurring at the end of a bull run bearish Kicking - A bearish candlestick pattern
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