Trading signal: the Hammer Blast identifies a rebound
Description
The Hammer Blast pattern occurs at the end of a down-trend. It often reflects a change in the sentiment of the market. The pattern works well for market indices (DAX, DOW…) and individual stocks.
| Category | : Rebound |
| Components | : Hammer candlestick pattern |
| Time frame(s) | : All |
| Usable for buy signals | : Yes |
| Usable for short sell signals | : No |
The Hammer candlestick pattern
consists of four candles. The two first candles need to be
bearish candles. The third candle needs to be a Hammer candle.
The fourth candle must be a bullish candle. The open of the
fourth candle must be above the close of the Hammer candle.
When to open a position?
As soon as the Hammer pattern is confirmed by the termination of the fourth candle a long position is bought at the market price. The Hammer pattern does not provide short sell signals.
This example shows a Hammer pattern on the S&P 500 chart in a 60-minute time frame.