Inverted hammer

The inverted hammer is a bullish reversal pattern. It can be a powerful way to help predict market movements or 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 open 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.