The inverted hammer appears as a short-bodied candle with a long wick above the body. The long upper wick indicates that buyers pushed price above the opening level during the session, but sellers pushed price back toward the open by close. The small body near the session low keeps the close near the low, which can reflect indecision near that level.
Traders look for the inverted hammer after a downtrend as a possible sign that selling pressure could be waning. Confirmation from the next trading session—such as a higher close or an increase in volume—helps validate the signal. Traders may also compare the pattern with other indicators (e.g., moving averages) or chart patterns to assess whether price action is likely to continue or reverse direction. Because a long upper wick can reflect temporary price pressure rather than a sustained shift, many practitioners require additional confirmation before acting, rather than relying on the pattern alone.
Like all candlestick patterns, the inverted hammer is one piece of price action used to gauge potential changes in trend. Its reliability varies by market, time frame, and prior price action; it is more meaningful when it occurs at support levels or after clear downtrends and is interpreted in conjunction with broader analysis.
After a several-week downtrend, a stock formed an inverted hammer on the daily chart; the next session closed higher than the hammer's close, prompting further analysis of potential price movement.
Hammer (candlestick) · Shooting Star · Doji · Price action · Trend reversal