Inverted Hammer
Candlestick PatternsA bullish reversal candlestick with a small body at the bottom and a long upper wick. It appears at the bottom of a downtrend and signals potential buying interest.
What Is an Inverted Hammer?
The inverted hammer appears at the end of a Downtrend. It has a small real body at the lower end of the candle and a long upper shadow at least twice the body's length. The lower shadow is minimal or absent.
During the session, buyers attempted to push the price higher but sellers brought it back down near the open. Despite this, the attempt itself shows that buying interest is emerging, which can precede a reversal.
How to Confirm the Signal
An inverted hammer requires confirmation more than most patterns. Traders wait for the next candle to open above the inverted hammer's body and close bullishly. Without this confirmation, the pattern often fails.
On EUR/USD, an inverted hammer at a daily Support zone combined with bullish divergence on RSI provides a higher-probability setup. A stop below the inverted hammer's low keeps risk defined.
Inverted Hammer vs. Shooting Star
The inverted hammer and Shooting Star share the same shape. The difference is location: the inverted hammer forms after a decline and signals potential bullishness, while the shooting star forms after a rally and signals bearishness. Context determines interpretation.
Related Terms
Hammer
A bullish reversal candlestick with a small body at the top and a long lower wick at least twice the body length. It appears at the bottom of a downtrend.
Shooting Star
A bearish reversal candlestick with a small body at the bottom and a long upper wick. It appears at the top of an uptrend, showing that buyers were overwhelmed by sellers.
Morning Star
A three-candle bullish reversal pattern consisting of a large red candle, a small-bodied candle (often a doji), and a large green candle. It signals the end of a downtrend.
Bullish Engulfing
A two-candle bullish reversal pattern where a large green candle completely engulfs the body of the preceding red candle. It signals strong buying momentum after a decline.