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Hammer

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28 views

Hammer

Uploaded by

hlocanigeturnumber
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Hammer

The hammer candlestick pattern is formed of a short body with a long lower
wick, and is found at the bottom of a downward trend.

A hammer shows that although there were selling pressures during the day,
ultimately a strong buying pressure drove the price back up. The colour of the
body can vary, but green hammers indicate a stronger bull market than red
hammers.

Inverse hammer

A similarly bullish pattern is the inverted hammer. The only difference being
that the upper wick is long, while the lower wick is short.

It indicates a buying pressure, followed by a selling pressure that was not


strong enough to drive the market price down. The inverse hammer suggests
that buyers will soon have control of the market.
Bullish engulfing
The bullish engulfing pattern is formed of two candlesticks. The first candle is a
short red body that is completely engulfed by a larger green candle.Though the
second day opens lower than the first, the bullish market pushes the price up,
culminating in an obvious win for buyers.

Piercing line
The piercing line is also a two-stick pattern, made up of a long red candle,
followed by a long green candle.

There is usually a significant gap down between the first candlestick’s closing
price, and the green candlestick’s opening. It indicates a strong buying
pressure, as the price is pushed up to or above the mid-price of the previous
day.
Morning star

The morning star candlestick pattern is considered a sign of hope in a bleak


market downtrend. It is a three-stick pattern: one short-bodied candle
between a long red and a long green. Traditionally, the ‘star’ will have no
overlap with the longer bodies, as the market gaps both on open and close. It
signals that the selling pressure of the first day is subsiding, and a bull market
is on the horizon.
Three white soldiers
The three white soldiers pattern occurs over three days. It consists of
consecutive long green (or white) candles with small wicks, which open and
close progressively higher than the previous day.

It is a very strong bullish signal that occurs after a downtrend, and shows a
steady advance of buying pressure.

Six bearish candlestick patterns

Bearish candlestick patterns usually form after an uptrend, and signal a point
of resistance. Heavy pessimism about the market price often causes traders to
close their long positions, and open a short position to take advantage of the
falling price.

Hanging man
The hanging man is the bearish equivalent of a hammer; it has the same shape
but forms at the end of an uptrend.

It indicates that there was a significant sell-off during the day, but that buyers
were able to push the price up again. The large sell-off is often seen as an
indication that the bulls are losing control of the market.

Shooting star
The shooting star is the same shape as the inverted hammer, but is formed in
an uptrend: it has a small lower body, and a long upper wick.

Usually, the market will gap slightly higher on opening and rally to an intra-day
high before closing at a price just above the open – like a star falling to the
ground.
Bearish engulfing

A bearish engulfing pattern occurs at the end of an uptrend. The first candle
has a small green body that is engulfed by a subsequent long red candle.

It signifies a peak or slowdown of price movement, and is a sign of an


impending market downturn. The lower the second candle goes, the more
significant the trend is likely to.

Evening star
The evening star is a three-candlestick pattern that is the equivalent of the
bullish morning star. It is formed of a short candle sandwiched between a long
green candle and a large red candlestick.it indicates the reversal of an uptrend,
and is particularly strong when the third candlestick erases the gains of the

first candle.
Three black crows
The three black crows candlestick pattern comprises of three consecutive long
red candles with short or non-existent wicks. Each session opens at a similar
price to the previous day, but selling pressures push the price lower and lower
with each close.Traders interpret this pattern as the start of a bearish
downtrend, as the sellers have overtaken the buyers during three successive
trading days.

Dark cloud cover


The dark cloud cover candlestick pattern indicates a bearish reversal – a black
cloud over the previous day’s optimism. It comprises two candlesticks: a red
candlestick which opens above the previous green body, and closes below its
midpoint.It signals that the bears have taken over the session, pushing the
price sharply lower. If the wicks of the candles are short it suggests that
downtrend was extremely decisive.

Four continuation candlestick patterns

If a candlestick pattern doesn’t indicate a change in market direction, it is what


is known as a continuation pattern. These can help traders to identify a period
of rest in the market, when there is market indecision or neutral price
movement.

Doji
When a market’s open and close are almost at the same price point, the
candlestick resembles a cross or plus sign – traders should look out for a short
to non-existent body, with wicks of varying length.This doji’s pattern conveys a
struggle between buyers and sellers that results in no net gain for either side.
Alone a doji is neutral signal, but it can be found in reversal patterns such as
the bullish morning star and bearish evening star

Spinning top

The spinning top candlestick pattern has a short body centred between wicks
of equal length. The pattern indicates indecision in the market, resulting in no
meaningful change in price: the bulls sent the price higher, while the bears
pushed it low again. Spinning tops are often interpreted as a period of
consolidation, or rest, following a significant uptrend or downtrend.On its own
the spinning top is a relatively benign signal, but they can be interpreted as a
sign of things to come as it signifies that the current market pressure is losing
control.

Falling three methods


Three-method formation patterns are used to predict the continuation of a
current trend, be it bearish or bullish.The bearish pattern is called the ‘falling
three methods’. It is formed of a long red body, followed by three small green
bodies, and another red body – the green candles are all contained within the
range of the bearish bodies. It shows traders that the bulls do not have enough
strength to reverse the trend.

Rising three methods

The opposite is true for the bullish pattern, called the ‘rising three methods’
candlestick pattern. It comprises of three short reds sandwiched within the
range of two long greens. The pattern shows traders that, despite some selling
pressure, buyers are retaining control of the market.

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