Hanging Man candlestick pattern

The Hanging Man is a single candlestick that occurs in an uptrend and indicates a bearish reversal. The pattern suggests that there may be indecision in the market and could be a sign of a possible reversal from an uptrend to a downtrend.

The short body indicates a small price movement between the opening and closing prices during the time period represented by the candlestick. The long bottom shadow indicates that prices fell significantly during the chosen timeframe, but managed to recover by the end of the timeframe. In other words, this pattern warns that the price has hit an insurmountable resistance, and the bulls' strength is exhausted and they are unable to push the price higher.

The pattern can be mistaken for the Hammer and Shooting Star. The Hammer is a bullish reversal candlestick pattern that occurs after a downtrend, while the Hanging man is a bearish reversal pattern that occurs after an uptrend. Their construction is the same: a short body near the top of the candlestick and a long bottom shadow.

The Shooting Star occurs after an uptrend, with a short real body near the top of the candlestick with a long up shadow, signaling a potential bullish reversal. In contrast, the Hanging Man occurs after an uptrend, showing a short body near the bottom of the candlestick with a long up shadow, indicating a potential bearish reversal.

Hanging Man candle:

• appears in uptrend
• red or green short body
• bottom shadow 2 or more times longer than body
• up shadow is absent (in classic interpretation) or too short

The red Hanging Man is more strong indicator of the emerging bearish mood in the market, in contrast to the green one.

Traders often look for confirmation in the subsequent price action. If the next candlestick confirms the reversal with a move lower, it adds more weight to the bearish signal of the Hanging Man.

Spotting a Hanging Man can serve as a signal to place a tight stop loss just above the high of the candlestick (not a trading advice).