Definition
Inverted Hammer appears at the bottom of downtrends. It has a small body near the low with a long upper shadow. While sellers ultimately pushed price back down, the upper shadow shows buyers tested higher prices. Confirmation needed from next candle.
Formula
Upper Shadow ≥ 2 × Real Body; Little or no lower shadow
Example
After a downtrend, stock opens at $45, rallies to $50, but closes at $46. The long upper shadow shows buying interest. A gap up next day would confirm the reversal.
FAQ
What is Inverted Hammer?
A potential bullish reversal with a small body and long upper shadow.
How do you calculate Inverted Hammer?
A common formula for Inverted Hammer is: Upper Shadow ≥ 2 × Real Body; Little or no lower shadow
Why is Inverted Hammer important?
Inverted Hammer helps investors evaluate candlestick patterns and make more informed decisions.