One of the most common patterns in trading. The Hammer candlestick is a bullish reversal formation that forms during a downtrend. The appearance of the candle is directly related to its name and resembles a hammer. Its lower shadow is the hilt, the body is the striking part, and the upper shadow is the protruding part of the hilt. A hammer candle can only appear in a downtrend.
When the price falls, the hammer makes it clear that the bottom is close and the price starts to rise again. The elongated bottom (shadow) shows sellers pushing prices, but buyers were able to overcome this pressure and close to the open. The formation of a hammer in technical analysis is a confirmation of oversold conditions and helps to identify support lines, as well as a key moment of a trend reversal.