THE HAMMER
A “hammer” is a candlestick with a small body (a small range from open to close price), with long wick below the body, & little to no wick above. It is very similar to a dragonfly doji in sight; the primary difference is that a dragonfly doji will have no body, meaning the open & close prices are equal.
When a hammer appears at the bottom of a downtrend, its long wick shows an unsuccessful effort by bears to push price down, & a corresponding effort by bulls to step in & push price back up quickly before the period closed. Therefore, a hammer candlestick in a downtrend suggests the potential exhaustion & a corresponding reversal. The “neckline” often determined by the high of the previous bar, is the level that price must hit on the next candlestick in order to confirm the hammer’s reversal signal.