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Thursday, April 19, 2012 4:38:26 PM
? Hammer candles have a small real bthat forms at the upper end of the days trading range
? The candle can be either blue or red, analyst usually do not differentiate.
? Lower wick at least twice as long as the real body
? No (or almost no) upper wick
After a bearish sell-off a significant rally brings price back up creating a long bottom wick. By day end buyers are able to push prices back to the upper range creating a short body.
The Hammer pattern signifies a weakening in bearish sentiment. The long lower wic continuation of the downtrend. However, renewed buying sentiment acts as support and drives the price higher to close near its opening price.
? Strength and Confirmation
The strength of a Hammer formation depends on where it appears. If a hammer forms near support levels, then the likelihood of a strong bullish reversal is high.
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