Click to learn more. An inverted hammer candlestick forms when a security advances significantly higher after the open, but gives up most or all of its intraday gain to close well off of its high. As opposed to the hanging man or the hammer , an inverted hammer looks like an upside down square lollipop with a long stick. Sometimes there be a short lower shadow, but not always.
Inverted hammers form after a decline.
After an advance, this same candlestick would be called a shooting star. An inverted hammer indicates that the current downtrend could be due for a reversal. There has been a resurgence in the bullish camp, but not yet a reversal. The candlestick implies that the bulls were able to drive the stock higher intraday, but could not hold on to the gains. By the close, the bears had prevailed and the stock ends just above or below where it started.