Hammer Candlestick

What Is a Hammer Candlestick?

A hammer candlestick is a single-candle pattern used in technical analysis to suggest that selling pressure may be fading after a price decline. It gets its name from its shape, which resembles a hammer with a handle. A small real body sits at the top of the candle's range, and a long lower shadow, sometimes called a wick, extends downward below it. The upper shadow is short or absent.

The long lower shadow shows that during the period, the price fell well below the opening level, but buyers pushed it back up near the open before the period ended. That rejection of lower prices is the core idea behind the pattern.

How It Is Identified

A hammer is usually defined by three features:

• A small real body near the top of the trading range
• A lower shadow that is at least about twice the length of the body
• Little or no upper shadow

The color of the body matters less than its position. A hammer can be green or red, though many traders give extra weight to a green body because it shows the close was above the open.

Hammers are considered most meaningful when they appear at the end of a downtrend, especially near a support level where buyers have stepped in before. The same shape appearing after an uptrend is called a hanging man and carries a different, generally bearish meaning.

Using the Pattern Carefully

A hammer is not a guarantee that prices will rise. Many traders wait for the next candle to close higher as confirmation before treating the pattern as a reversal pattern signal. Without confirmation, a hammer can simply be a pause within a continuing decline.

Because the pattern reflects only one period's price action, it is usually viewed alongside other information, such as volume, the broader trend, and other indicators. It can appear on any timeframe, from intraday to weekly charts, and analysts interpret it with that timeframe in mind.

Why It Matters to Investors

Hammer candlesticks offer a compact way to see how buyers and sellers contested price within a single period. Understanding the pattern can help an individual investor read a candlestick chart and recognize when a sell-off was rejected, while keeping in mind that the pattern alone does not predict outcomes.