Series 8:Hammer Candlestick Patterns

Reliance Industries had been in a steady downtrend for the past five sessions, with prices falling consistently. On one particular day, the stock opened at ₹1300 after closing higher during the previous session, hinting at yet another bearish session. During trading hours, the price plummeted further, reaching a low of ₹1250, reinforcing the bearish momentum and leading many to expect the downtrend to persist.

Suddenly and without warning, buyers stepped in aggressively at lower levels, viewing the sharp drop as an opportunity to accumulate the stock.

Their collective efforts pushed the price back up, and by the end of the day, Reliance closed at ₹1320—above its opening level.

The outcome is a distinctive candlestick pattern known as a Hammer.

It is marked by a small real body near the top of the day’s range and a prominent, long lower shadow.

The long lower shadow reflects intense selling pressure earlier in the day. However, the strong recovery that results in prices closing near the opening price reveals a significant shift in market sentiment.

This shift in dynamics often signals that the prevailing downtrend could be losing steam and that a significant reversal might be around the corner.

Similar concepts:

Technical Analysis | OHLCV | Line Chart | Bar Chart | Candlesticks | Trend Analysis | Candlestick Patterns

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