This pattern consists of a black body followed by an Inverted Hammer that is characterized by a long upper shadow and a small body. It is similar in shape to the Bearish Shooting Star but unlike the Shooting Star the Inverted Hammer appears in a downtrend and signals a bullish reversal.
1. The market is characterized by a prevailing downtrend.
2. The first day of the pattern is a black candlestick.
3. On the second day a small body at the lower end of the trading range is observed. Color of this body is not important.
4. The upper shadow of this second candlestick should be at least twice as long as the body.
5. There is (almost) no lower shadow.
Pattern Requirements and Flexibility
The body of the Inverted Hammer should be small. The upper shadow should be at least twice as long as the body but not shorter than an average candlestick length. It is desired that there is no or a very tiny lower shadow. The bottom of the inverted hammer should be lower than the preceding candlestick