What is an Inverted Hammer?

Another variation of a candlestick reversal pattern is the so called inverted hammer. When occurring within a downtrend, it may be characterized as a bullish signal.

An inverted hammer formation resembles a shooting star or an upside down (inverted) hammer formation. It consists of a very long upper wick, no (or very little) lower wick, and a real body at the lower end of the range. The color of the body is not important.

Usually a gap is observed between its real body and the previous candlestick's body. The larger this gap is, the stronger the signal of a trend reversal.

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