Hammer & Hanging Man

The Hammer or Hanging man is a one candle pattern that occasionally appears as a transition point warning. The appearance of this candlestick should be interpreted based on the position of its appearance. The hammer is a bullish reversal signal, while the hanging man is a bearish reversal signal.

A hammer is a green or white colored thin bar with a long lower wick hanging beneath it. It commonly occurs at the end of a downtrend. Price opens at the bottom of the body, falls to create a trading period low, then reverses and rises positively into the close.

The hanging man occurs when the thin bar is red or black colored with a long wick beneath it. It occurs at the end of an uptrend. Prices open at the top of the body, move to the low, and come up to close. It fails to push beyond the open. This indicates that buy side power has died, and the sellers control the action.