Hammer
A hammer is a bullish candlestick pattern with a small body at the top and a long lower wick (at least 2x the body). It forms after a downtrend and signals potential reversal.
Understanding the Concept
The hammer tells a story: sellers pushed price down hard during the session, but buyers stepped in and pushed it back up near the open. That rejection of lower prices is bullish. The longer the lower wick, the stronger the rejection. Color matters less than shape, but a green hammer is slightly more bullish. Always wait for confirmation—the next candle should close higher. Hammers at support are most reliable. A hammer in the middle of a range means nothing.
Real-World Example
After Ethereum drops from $3,000 to $2,400, a hammer forms: opens at $2,450, drops to $2,350, but closes at $2,440. The long lower wick shows buyers rejected the $2,350 level. Next day's green candle confirms the bottom.
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