A Hammer is a price pattern in candlestick charting that occurs when a security trades significantly lower than its opening, but rallies within the period to close near the opening price. This pattern forms a hammer-shaped candlestick, in which the lower shadow is at least two times the size of the real body. On many occasions, this can also signify an important bottom or support area for the stock.Diagram of Hammer Candlestick :-The open of the pattern is termed as the level of support and will act as a floor from which the security will continue to trade in an upward trend. While there is always speculation that this might mark an impending reversal or a sell signal, most of the times during these situations, the actual price action tested at this level once again proves to be ineffective and just like all other patterns, eventually fails to fulfill its original objective and continues on with its own course of trading.
