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Tuesday, 09 December 2008 14:04 |
The inverted hammer is usually formed at the bottom of a downtrend. They are formed when the sellers were able to create a new low, but at some point in the game, buyers entered the market believing that it was time to buy. The buyers were not able to hold price higher, but the significance is that buyers were able to control the market for a while, signaling less strength from sellers.

In the following example we have a daily down trend for about 10 days. When the hammer is formed, a reversal of the trend can be expected. When it happens look for recent highs to be hit and possibly taken out.

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Last Updated on Tuesday, 09 December 2008 14:05 |