DEFINITION of 'Hammer'

A price pattern in candlestick charting that occurs when a security trades significantly lower than its opening, but rallies later in the day to close either above or close to its opening price. This pattern forms a hammer-shaped candlestick.



A hammer occurs after a security has been declining, possibly suggesting the market is attempting to determine a bottom.

The signal does not mean bullish investors have taken full control of a security, it simply indicates that the bulls are strengthening.

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