What Is an Inverted Hammer?

The inverted hammer candlestick is the counterpart of the shooting star but appears during a downtrend. It is often seen as a bullish reversal signal. The characteristics are the same:

• Small real body
• Long upper shadow
• Little or no lower shadow

Inverted Hammer Formation:

1. Bears dominate early in the session.
2. Bulls counterattack and drive the price higher.
3. Bears push back, but the price still closes near the open.

While the inverted hammer looks promising for a reversal, don’t rely solely on it. The long upper shadow still signals rejection by sellers.

Key Takeaways

• Shooting star: Found at the top of an uptrend; bearish signal.
• Inverted hammer: Found at the bottom of a downtrend; potentially bullish but requires confirmation.
• Always consider market context and wait for additional confirmation before entering trades.

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