Inverted Hammer candlestick pattern

The Inverted Hammer is a single candlestick pattern that typically appears at the end of a downtrend. Its open, close and lowest prices are relatively close to each other, so the candlestick has a very short body.

The long up shadow of the candlestick indicates that sellers drove prices down during the session, but buyers stepped in and pushed prices back from the previous downtrend.

While the Inverted Hammer and Shooting Star patterns look similar, the key difference is where they occur in the trend. The Inverted Hammer appears at the end of a downtrend, signaling a potential reversal to the uptrend; while the Shooting Star appears at the end of an uptrend, signaling a potential reversal to the downtrend. In both patterns, there is a small body near the bottom of or at the end of the candlestick.

Inverted Hammer candlestick:

1st

• appears in downtrend
• very short red or green body
• up shadow is at least 2 time longer than candlestick body
• short to no bottom shadow
• looks like upside-down letter “T”

However, this is a less reliable figure and always requires further confirmation. Indicators as a trendline break or confirmation with the next candlestick should be used before initiating a potential buy order. The pattern can be also confirmed by analyzing the change in the volume of the assets being traded.