To The Moon

This is the second part of a series which will show how we can use candlestick to identify bullish signal.

You can refer to Part 1 here - Part 1/11 - How to use [Hammer Candlestick Chart] to identify Bull market

Do remember that we should never use candlestick chart alone when we trade, we also need to look out for other indicators which we are comfortable with.

In this part, I will be sharing Inverse Hammer Bullish Signal

Here is a recap on how to read a single candlestick

How to Read a Single Candlestick

• Each candlestick represents one day’s worth of price data about a stock through four pieces of information: the opening price, the closing price, the high price, and the low price.

• The color of the central rectangle (called the real body) tells investors whether the opening price or the closing price was higher.

• A black or filled candlestick means the closing price for the period was less than the opening price; hence, it is bearish and indicates selling pressure.

• Meanwhile, a white or hollow candlestick means that the closing price was greater than the opening price. This is bullish and shows buying pressure.

• The lines at both ends of a candlestick are called shadows, and they show the entire range of price action for the day, from low to high. The upper shadow shows the stock’s highest price for the day, and the lower shadow shows the lowest price for the day.

Inverse Hammer Bullish Signal

This is similar bullish pattern to hammer candlestick. The only difference being that the upper wick is long, while the lower wick is short.

It indicates a buying pressure, followed by a selling pressure that was not strong enough to drive the market price down.

The inverse hammer suggests that buyers will soon have control of the market.

Let us use some U.S. stocks to show examples of them.

Palantir (PLTR) - 05 June

Shortly after 10.50am(EST) we can see a inverse hammer formed, this show that Buyer is in control because there is a new contract deal announced by Palantir.

We can see that the price start to trend upwards and eventually $Palantir Technologies Inc.(PLTR)$ close near to 5% higher.

Thing to note about Candlestick Charts

• Candlestick Charts can help us as it reveal the market psychology (the fear and greed experienced by sellers and buyers) through the various indicators, such as shape and color, but also by the many identifiable patterns that can be found in Candlestick Charts.

• But do remember that Candlestick Charts do not express the events taking place between the open and close price - only the relationship between the two prices.

• So Candlestick Charts could not tell us how volatile trading was within that single time period.

This is a good example of the market psychology of the buyers as they start to load up as there is potential good news of the stock (in this case, PLTR).

Here is how PLTR signal can be detected using SMA50 and SM200

Using data over 600 trading days, we can see that PLTR just begin its Bull trend, it is not very strong.

So we might see a few inverse hammer appearing in the coming days or weeks.

Summary

The candlestick chart is only one of the method you can see if there will be a bullish signal for a particular stocks.

It need to be used with other indicators or technical analysis. But for a start, we can use it to sense the market.

I have shared an example of how to use inverse hammer with SMA to find if the stock is experiencing a bullish trend.

Appreciate if you could share your thoughts in the comment section whether you also use ‘inverse hammer’ candlestick chart together with other indicators to identify bullish signal.

@TigerStars @Daily_Discussion  appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.