Inverted Hammer

Appearance: This is a two-candle pattern in an downtrend, where the second candle has a small body and a large upper shadow and a small or no lower shadow, and the body of the second candle gaps below that of the previous candle.

Criteria: There must be a current downtrend. The body of the second candle should gap below the previous body, or if not, should only penetrate the previous body slightly.

Effect: The Inverted Hammer means that the downtrend has been halted during the time period of the candle, but has fallen back towards the end though with little or no progress in the direction of the trend ­ the momentum not being maintained. It is at best a weak upturn signal.

Note: In candlestick descriptions, "white (green)" refers to an up-bar, and "black (red)" refers to a down-bar. Individual traders prefer different bar colors. For example, we personally trade with candles set to green for up and red for down. (TradeStation defaults their Candlesticks to this color convention.) Most related textbooks use white (or green, if color is used) for up and black (or red) for down.