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Glossary · Candlestick patterns

Inverted hammer

A potential bullish reversal candle after a decline: a small body near the low and a long upper wick; it needs confirmation.

By Sky Trade editorial teamUpdated

The inverted hammer appears at the end of a decline and looks like a shooting star: small body at the bottom of the range, long upper wick, little or no lower wick. The interpretation differs because of where it occurs. In a downtrend the long upper wick shows buyers attempting a rally for the first time in a while. They failed to hold it, but the attempt itself is the information.

That makes the inverted hammer a tentative signal. It says buyers have shown up, not that they have won. Most traders require confirmation: a next candle that closes above the inverted hammer's body, ideally at support.

Compared with the regular hammer, whose long lower wick shows buyers winning back a drop within the period, the inverted hammer is generally considered weaker — its rally attempt was rejected, after all.

It is also easy to over-spot. On fast charts long upper wicks are common, and in a strong downtrend a series of them can appear while price keeps falling. Look for the pattern at levels, after a meaningful decline, and act only once the market confirms it. See shooting star and inverted hammer.

Example

AUD/USD drops from 0.6700 to 0.6640. An M15 candle opens at 0.6641, spikes to 0.6656 and closes at 0.6643. The next candle closes at 0.6660, the confirmation that makes it a possible Higher setup.

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