An Inverted Hammer is a bullish pattern with a long upper shadow, little or no lower shadow, and a small body forming near the bar low. This may indicate that sellers have lost their strength, supply has been pushing prices lower previously, whereas theInverted Hammer candle indicates significant buying.
What is the Inverted Hammer Pattern
The Inverted Hammer pattern indicates significant buying during a downtrend. Although sellers managed to drive prices to close near the open, the intra-bar byuing may indicate that the selloff may be coming to an end. The pattern may therefore provide an opportunity to close a short position, alternatively, consider a long trade.
Typically, the candle range for the Inverted Hammer pattern is above average with a large upper shadow. The upper shadow is x times larger than the body size than the lower shadow. As for determining the current bias, the candlestick indicator comes with an internal Swing Trend indicator. Deviation type, calculation period and deviation threshold is set via the indicator dialogue box. Likewise, the small-body requirement is also user selectable. Finally, the prior candle to the Inverted Hammer pattern was a down-close or a small body bar. The bearish equivalent to this pattern is the Hanging Man.
Other bullish candlestick patterns
Other bullish candlestick patterns include the bullish belthold, bullish engulfing,bullish harami, bullish harami cross, white marubozu, bullish piercing, bullish hammer, dragonfly doji, morning star, morning doji star, long white candle, tweezers bottom, three white soldiers and the rising three methods.
The Inverted Hammer and all of the above patterns may be identified with our candlestick pattern indicator for NinjaTrader 8. Check out the LizardIndicators Premium Section for more information.
