inverted hammer

 

The inverted hammer candlestick is a single candle pattern that can signal a potential reversal in an asset's price trend. It typically appears after a downtrend and indicates a possible bullish reversal. characteristics:

1. Shape: The inverted hammer has a small real body at the bottom of the candle with a long upper shadow. The upper shadow should be at least two times the length of the body, and there should be little or no lower shadow.

2. Location: It appears at the bottom of a downtrend, suggesting that selling pressure is weakening and buyers may be gaining control.

3. Color: The color of the candle body (green or red) isn't as important as the structure, but a green (bullish) inverted hammer is generally considered a stronger reversal signal.

4. Interpretation: The long upper shadow shows that buyers tried to push the price higher during the session, but the sellers managed to bring it back down, leaving the body near the low of the day. This can indicate that the buyers might take control in the following period.

5. Confirmation: For the pattern to be considered a reliable signal, it should be confirmed by the next candle. If the next candle closes above the high of the inverted hammer, it increases the probability of a reversal.