Hammer / Dragonfly Doji Bullish
How to Identify it
- Small real body at the upper end of the trading range
- Lower shadow at least twice as long as the real body
- No (or almost no) upper shadow
What it Means
There is a sharp sell off after the market opens during a downtrend. However,
by the end of the trading day, the market closes at or near its high for the day. This signifies a weakening
of the previous bearish sentiment, especially if the real body is white (the close is higher than the open price).
Since the certainty for a Hammer indicator is low, the trend reversal can be confirmed by a higher open and an
even higher close on the next trading day. If the open and the close are identical, the indicator is considered
a Dragonfly Doji. The Dragonfly Doji has a higher reliability associated with it than a Hammer.