[B]Student’s Question:[/B]
How would one interpret a Hammer candlestick when it appears on a chart? Thanks.
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[B]Power Course Instructor’s Response:[/B][B][/B]
[B][/B]
A hammer candlestick appearing at the bottom of a bearish move (see the chart below) will indicate the potential for a move to the upside.
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The long wicks at the base of the hammer indicate that during the time frame of the candle, the pair traded quite a bit below its opening but that the lower price could not be sustained. So, when a lower price is tested but cannot be held, it indicates that the bulls are in control and, as traders, we should be on the lookout for a move to the upside.
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Note that in the hammer examples on the chart below (framed in yellow), we see a strong upward move after each hammer.
