The short answer

An inverted hammer is a candle with a small body near the bottom of its range and a long upper wick, appearing after a decline. The push higher failed to hold, but the attempt itself is the signal: buyers were active for the first time in the move.

A inverted hammer forming after a decline, drawn from the pattern's real open, high, low and close proportions Inverted hammer

Drawn to the real proportions the formation rules describe. Lead-in candles are dimmed; the pattern itself is bracketed.

  • Traditional bias Bullish
  • Type Reversal
  • Built from One candle
  • Context After a decline

How to spot it

  • The real body sits in the lower third of the candle's range.
  • The upper wick is at least twice the body's height.
  • Little or no lower wick.
  • It appears after a decline, which is what separates it from a shooting star.

What it actually means

This one is counter-intuitive, which is why it is misread so often. The candle looks like a failure, since price rose and gave it back. But it forms in a downtrend, where the notable thing is that a rally happened at all. It signals that buyers are testing, not that they have won, which is exactly why it needs confirmation more than most.

What confirms it

The next candle opening higher and closing above the inverted hammer's body. Without that, it is genuinely just a failed rally.

What invalidates it

A close below the inverted hammer's low, which resumes the decline.

Where people get it wrong

It is drawn identically to the shooting star, and preceding trend is the only thing that distinguishes them, so it is one of the most frequently mislabelled candles on any chart. The bigger surprise is what it does next: in Bulkowski's catalogue of 103 candle patterns the inverted hammer ranks near the top for overall performance, and yet it resolves downward, as a bearish continuation, about 65 per cent of the time. Both are true at once, which is exactly why the confirming candle is not optional here.

Common questions

Is the inverted hammer bullish or bearish?
The traditional reading is bullish. This one is counter-intuitive, which is why it is misread so often. It carries that reading only after a decline.
What confirms a inverted hammer?
The next candle opening higher and closing above the inverted hammer's body. Without that, it is genuinely just a failed rally.
When does the inverted hammer stop working?
A close below the inverted hammer's low, which resumes the decline. Beyond that, it is drawn identically to the shooting star, and preceding trend is the only thing that distinguishes them, so it is one of the most frequently mislabelled candles on any chart.

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Formation rules follow Japanese Candlestick Charting Techniques by Steve Nison. Reviewed 2026-09-14.