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The Bullish Hammer: Would You Know It If You Saw It?

by | Tips & Strategies

Bullish Hammers, as the name suggests, is a signal on a chart that alerts you to be on the lookout for a market that is setting up to reverse and trade higher! I’ve highlighted in yellow this exciting candlestick set up in the chart below.

chart1

Here are some characteristics with an image of its appearance:

  • It is a reversal formation
  • It is typically the strongest after a significant move to the downside
  • The Bullish Hammer candle starts with a big move to the downside but the market retraces back to the upside, most often pretty close to where we opened
  • There is little to no “upper wick” indicating the market failed to trade higher at any point in the trading day
  • This formation is indicating that there was an unsustainable sell-off in the day where buyers quickly took control after a failed attempt by sellers to take the market lower. This price action is what makes the body small and compact near or at the top of the candle with the long tail
  • It is ideal, and generally preferred, when the bottom wick is 2x the size of the “body” of the candle
  • It can be used to signal for traders looking to buy that they should be paying close attention as the downtrend is losing momentum.

chart2

This is one of many formations that I identify and send out to my subscribers on a regular basis. I include trade ideas accompanied with risk and objective points for you to keep an eye on!

If you like to trade these types of set-ups and you enjoy technical analysis, click the link, join the team…and Let’s Figure Out Some Charts!!!

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About Brian Cullen

Brian’s career began working with equities and equity options at Charles Schwab. Since then he has held various positions within the financial industry, from head clerk on a high volume trading desk on the floor of the CBOE, to being a “market maker” for a proprietary trading firm in the SPX and OEX pits. Brian then branched off to expand his horizons and transitioned into the futures market as a retail broker. He was a Market Strategist for Lind-Waldock’s Private Client Group division, dealing exclusively in the commodity markets.

Brian joined Daniels Trading in early 2009 to expand his added value services as a broker, and to build his client base in new areas. With Daniels Trading’s diversified execution categories, the opportunities for Brian’s clients are endless.

Brian’s goal is to work with his clients to focus on one main principle: Staying true to the principles of successful trading.

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