How To Use An Inverted Hammer Candlestick Pattern: S&P 500

The Inverted Hammer candlestick formation occurs mainly at the bottom of downtrends and can act as a warning of a potential bullish reversal pattern. 

What happens on the next day after the Inverted Hammer pattern is what gives traders an idea as to whether or not prices will go higher or lower.

Can't touch these... Hammer time! 🕺 

After a long downtrend, the formation of an Inverted Hammer is bullish because prices hesitated to move downward during the day. Sellers pushed prices back to where they were at the open, but increasing prices shows that bulls are testing the power of the bears.

Green vs Red Inverted Hammer 

When the low and the open are the same, a bullish, green Inverted Hammer candlestick is formed and it is considered a stronger bullish sign than when the low and close are the same (a red Inverted Hammer).

How Do You Trade on an Inverted Hammer Candlestick? 

It is important to note that the inverted hammer pattern is a warning of potential price change, not a signal, by itself, to buy. 

Always pair it with other indicators such as a trendline break or confirmation candle should be used to generate a potential buy signal.

Broke trendline, under 200 sma awaiting news

⚠️ Trading Tips: CPI for February is at 6% yoy as market expected. SPY broke the year long trendline (yellow line) but retrace back to 390 when bank sector pull back at mid day. We can wait for a breakout above 200 simple moving average (red line) for an uptrend confirmation after PPI report on Wednesday at 8:30am. 

Setting up for 397/399 this week if we break 393. Looking at calls above 392.18 and puts under 390 on Wednesday.

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