Saturday, April 17, 2010 2:47:09 PM
If you study the chart below, every time we have formed a hammer candle or close to a hammer candle in a downtrend (a washout occuring during the session with recovery or partial recovery towards the end of the session), the stock has rebounded in the following session(s). Look back at Aug - 2 examples, late Sept, early and late Dec, mid March and even earlier this month there are clear examples. Clearly Friday's hammer is most pronounced and approaches capitulation in the stock, having made the lowest low for over the last 6 months.
Regarding a "hammer candle", like any other chart signal, it requires confirmation. A Hammer can be confirmed by a bullish gap between the Real Body of the Hammer and the open on the next session. In other words, look for the next session opening higher than the Real Body of the Hammer. The greater the gap, the stronger the signal. Patterns with longer Lower Shadows have greater significance.
Monday should confirm the pattern.
Makamai
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