Hammer Candlestick

The Hammer candlestick takes its name from the shape resembling a hammer head atop a handle. It forms when a session opens, declines significantly during the session, but then recovers to close near or above the open, leaving a small body near the top of the range and a long lower shadow. The lower wick is typically at least two to three times the length of the body, and the candle has little or no upper wick.

In the historical candlestick literature, the Hammer was interpreted as a session in which sellers drove prices lower aggressively but buyers ultimately rejected the lower prices and pushed the market back up to the open or above. The long lower wick was treated as evidence of buying support emerging at lower levels, while the small upper body indicated that the recovery was nearly complete by the session's close.

The color of the Hammer body carries minor analytical weight in historical studies — a bullish (hollow) body was considered modestly more positive than a bearish (filled) body, since a close above the open added to the evidence of buyer strength — but the defining feature was the shape of the wick rather than the body color. Either version was classified as a Hammer.

Historically, the Hammer's significance was enhanced when it appeared at a recognizable support level, following a prolonged or steep downtrend, or on above-average volume. The subsequent session's behavior was considered important: a Hammer followed by a bullish session that closed above the Hammer's body was regarded in historical analysis as confirmation that buying had shifted the momentum.

The Inverted Hammer has the same structure reversed — a small body near the bottom and a long upper wick with no lower wick — and historically appeared at price lows in a downtrend. Despite its shape suggesting selling, the long upper wick in the context of a downtrend indicated that buyers had challenged sellers during the session, and an upward-confirming next session was required for meaningful interpretation.