Trading signal: Hammer pattern identifies rebound

Description

The Hammer pattern occurs at the end of a down-trend. It often reflects a change in the sentiment of the market. The pattern works well for market indices (FTSE, DAX, AEX…) and individual stocks.

   
Category : Rebound
Components : Hammer candlestick pattern
Time frame(s) : All
Usable for buy signals : Yes
Usable for short sell signals : No
  Video

The Hammer candlestick pattern consists of four candles. The two first candles need to be bearish candles. The third candle needs to be a Hammer candle. The fourth candle must be a bullish candle. The open of the fourth candle must be above the close of the Hammer candle.

Hammer candle pattern

When to open a position?

As soon as the Hammer pattern is confirmed by the termination of the fourth candle a long position is bought at the market price. The Hammer pattern does not provide short sell signals.

Free trading signal: Hammer candle pattern  

This example shows a Hammer pattern on the S&P 500 chart in a 60-minute time frame.