34 THE CANDLESTICK TRADING BIBLE The Hammer (pin bar) The Hammer candlestick is created when the open high and close are
roughly the same price; it is also characterized by a long lower shadow
that indicates a bullish rejection from buyers and their intention to
push the market higher.
See the illustration below to see how it looks like:
The hammer is a reversal candlestick pattern when it occurs at the
bottom of a downtrend.
35 THE CANDLESTICK TRADING BIBLE This candle forms when sellers push the market lower after the open,
but they get rejected by buyers so the market closes higher than the
lowest price.
See another example below:
As you can see the market was trending down, the formation of the
hammer (pin bar) was a significant reversal pattern.
The long shadow represents the high buying pressure from this point.
Sellers was trying to push the market lower, but in that level the buying
power was more powerful than the selling pressure which results in a
trend reversal.
The most important to understand is the psychology behind the
formation of this pattern, if you can understand how and why it was
36 THE CANDLESTICK TRADING BIBLE created, you will be able to predict the market direction with high
accuracy.
We will talk about how to trade this pattern and how to filter this signal
in the next chapters.
