June 24, 2017

About Hammers and Inverted Hammers

This is a Hammer.. this can be bullish or bearish depending on where it happens. After a strong uptrend, this has bearish implications and vice versa.

Understanding the psychology of market participants will explain everything.

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And this is an Inverted Hammer... sometimes known as shooting star (suggesting bearishness).

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It does not matter what name you give to this candlestick formation.... just remember that this hints at a trend reversal.

Now the apparently funny thing is the SAME formation can occur anywhere but the hint is trend reversal. This means that after a strong trend if you have a hammer or inverted hammer, you should be prepared for a trend reversal. NOTE that I have not indicated if the previous trend was UP or DOWN.

CAVEAT: understand the psychology of what is happening. This is very important and will tell you when a supposedly reliable pattern will fail.

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