The Hammer is one of the most reliable single-candle bullish reversal patterns. It forms after a downtrend and signals that sellers pushed price down significantly during the session, but buyers stepped in strongly and pushed price back up near the open. This rejection of lower prices is a sign that bulls are regaining control.

Hammer vs Hanging Man

Hammer (after downtrend = bullish) Inverted Hammer (after downtrend = bullish) Hanging Man (after uptrend = bearish) Lower wick ≥ 2× body Upper wick ≥ 2× body Same shape, opposite context
Position in trend determines bullish or bearish interpretation

Hammer Identification Rules

  • Lower wick is at least 2× the length of the body (ideally 3×)
  • The body is in the upper third of the candle's range
  • Little or no upper wick
  • Appears after a downtrend (for bullish reversal)
  • Candle colour (green or red) is secondary — position matters more

Trading the Hammer

Hammer Entry Strategy:
1. Identify Hammer after a downtrend or at key support level
2. Wait for the next candle to be bullish (confirmation)
3. Entry: Buy on the open of the candle after the confirmation
4. Stop Loss: Below the low of the Hammer's wick
5. Target: Previous resistance or 1:2 risk-reward minimum

A green (bullish) Hammer is stronger than a red one. A Hammer at a major support level (EMA 200, key price level) is the highest-probability setup.

Hammer at Key NSE Levels

Hammers are most significant when they appear at:

  • 52-week lows or multi-year support zones
  • The 200-day SMA on NIFTY 50
  • Fibonacci 61.8% retracement level
  • Round number support (NIFTY 22,000, 21,000, etc.)
  • Prior major consolidation zones
The COVID low in March 2020 was marked by a series of Hammer candles on the NIFTY weekly chart at the 50% Fibonacci retracement — a textbook Hammer reversal that signaled one of India's greatest bull runs.