📘 Inverted Hammer

By 42Fibonacci • Last Updated: 2025-12-15 • 7–9 min read
Part of the 42Fibonacci Candlestick Education Series

What Is an Inverted Hammer?⧉

An Inverted Hammer is a bullish reversal candlestick pattern that typically appears after a downtrend. It is defined by a small real body near the bottom of the candle’s range and a long upper shadow, usually at least twice the length of the body.

Unlike the Hammer, where sellers push price lower and fail, the Inverted Hammer reflects an early challenge from buyers. During the session, buyers attempt to push price higher, creating a long upper shadow. Sellers respond by pushing price back down, but they are unable to drive it to new lows by the close. This shift shows that bearish control is weakening, even though buyers have not yet taken full command.

Origin of the Pattern⧉

The Inverted Hammer gets its name from its appearance — it resembles an upside-down hammer, with the shadow forming the “handle” above the small body.

Symbolically, the pattern captures the market’s attempt to “flip the hammer” and strike back against bearish momentum.

The Psychology Behind the Inverted Hammer⧉

The Inverted Hammer represents a session where buyers test control for the first time after a decline.

Early in the session, buyers push price higher, creating a long upper shadow. This move challenges the prevailing downtrend and signals that demand is beginning to reappear. For the first time in several sessions, sellers are forced to respond rather than dictate price unopposed.

However, sellers do manage to push price back down before the close, preventing buyers from fully holding the gains. The candle finishes near the lower end of the range, leaving a small real body.

This mixed outcome is precisely what makes the Inverted Hammer important. Buyers did not win the session — but they proved they are willing and able to push price higher. At the same time, sellers were unable to drive price to new lows.

The Inverted Hammer marks the moment where bearish momentum begins to weaken and the market starts to question whether lower prices are still justified.

How to Trade the Inverted Hammer (The Right Way)⧉

Quick read: Only consider it after a clear decline, favor it at support or demand, require a bullish close above the candle high for confirmation (ideally on volume), and set risk at/just below the Inverted Hammer’s low.

Like all reversal candles, the Inverted Hammer is a warning sign, not a signal to act immediately. To trade it effectively, focus on context, confirmation, and risk definition.

Confirm the Downtrend

The Inverted Hammer only has meaning when it forms after a sustained decline.

• Lower highs and lower lows should already be established
• The pattern loses significance in sideways markets or shallow pullbacks

Without prior bearish pressure, there is nothing to reverse.

Evaluate Location Carefully

High-quality Inverted Hammers often form:

• Near support levels or demand zones
• After extended or accelerated selling
• Around areas where downside momentum begins to slow

Location often matters more than how perfect the candle looks.

Wait for Bullish Confirmation

The Inverted Hammer alone does not prove buyers have taken control.

• A bullish confirmation candle closing above the Inverted Hammer’s high strengthens the setup
• Rising volume during confirmation increases reliability

Confirmation shows that the initial buying attempt was not a one-day anomaly.

Define Invalidation Clearly

Every setup needs a clear point where the idea is proven wrong.

In an Inverted Hammer, the session low represents the level that sellers failed to break after buyers attempted to push price higher. Even though the candle has little or no lower shadow, that low marks the boundary between weakening bearish control and renewed selling dominance.

If price later closes below the low of the Inverted Hammer, it signals that sellers have regained control and that the bullish reversal attempt has failed.

Case Study: Inverted Hammer at a Downtrend Support Zone⧉

Quick read: After sliding from a late-August peak near ~$212 into ~$195 support, $MMC printed an Inverted Hammer under near oversold conditions; confirmation was delayed as price paused, but buyers ultimately regained control and drove a bullish trend into mid October.

Timeline

• Late August: $MMC reaches a local peak near $212 and begins to roll over.
• Late August – Mid September: Price declines steadily into the ~$195 area, establishing a clear downtrend.
• Mid September (signal day): An Inverted Hammer prints at support as momentum approaches oversold levels.
• Following sessions: Several Spinning Top–like candles appear, reflecting temporary equilibrium.
• Fifth session: Buyers regain control, confirming the reversal and initiating a bullish trend into mid October.

The Signal

• After a sustained decline, an Inverted Hammer printed — a small real body with a long upper wick — showing that buyers were able to push price higher intraday despite prevailing bearish pressure.
• Delayed Confirmation: Rather than an immediate follow-through, the next several candles resembled Spinning Tops, indicating indecision and balance between buyers and sellers before resolution. The fifth candle then confirmed that buyers had regained control.

Context

• A clear downtrend carried price from ~$212 to ~$195, creating the proper environment for a bullish reversal pattern.
• The Inverted Hammer formed at horizontal support, where buyers had previously shown interest.
• Momentum Exhaustion: RSI was already near oversold, suggesting downside pressure was becoming stretched.

What Happened

• Sellers were unable to extend the decline following the Inverted Hammer.
• After several sessions of consolidation, buyers asserted control on the fifth candle, and $MMC transitioned into a sustained bullish advance through mid October.

Common Mistakes Traders Make With Inverted Hammers⧉

Quick read: Buying before confirmation, mixing it up with a Shooting Star by ignoring trend, trading it away from support/structure, skipping the invalidation at the low, or expecting an instant rally without allowing basing.

The Inverted Hammer is often misused because it looks deceptively bullish while still closing near the lows. Many traders either overestimate its strength or misunderstand what the candle actually confirms.

Treating the Inverted Hammer as Proof of a Reversal

An Inverted Hammer does not mean buyers have taken control.

It only shows that buyers were able to challenge the downtrend intraday. Without confirmation, sellers may still dominate the broader structure. Traders who enter immediately often get caught in continuation moves.

Ignoring the Need for Confirmation

Because the Inverted Hammer closes near the lower end of its range, confirmation is essential.

Without a bullish follow-through candle, the long upper shadow may simply represent a failed rally attempt rather than the beginning of a reversal. The next session — not the Inverted Hammer itself — determines whether buyers are gaining traction.

Confusing Inverted Hammers With Shooting Stars

The same candle shape has opposite meaning depending on trend context.

• After a downtrend, it is an Inverted Hammer (potentially bullish).
• After an uptrend, it is a Shooting Star (potentially bearish).

Failing to account for trend direction leads traders to assign the wrong bias to the same structure.

Overlooking Where the Pattern Forms

An Inverted Hammer is far more meaningful near:

• Prior support
• Demand zones
• Areas where downside momentum is slowing

When it forms in open space or far from structure, the pattern often reflects short-term volatility rather than a meaningful shift in sentiment.

Misunderstanding the Importance of the Low

Because Inverted Hammers have little to no lower shadow, traders sometimes ignore the session low altogether.

However, that low represents the level sellers could not break after buyers showed strength. A close below it invalidates the bullish thesis and confirms that sellers remain in control. Ignoring this level leads to poor risk definition.

Expecting Immediate Follow-Through

Even valid Inverted Hammers often lead to basing or consolidation before any meaningful move develops.

Traders who expect an immediate rally may exit too early or misjudge the pattern as a failure when price simply needs time to confirm direction.

Summary: Early Buying Attempts Matter⧉

The Inverted Hammer highlights moments when buyers begin to challenge a downtrend, even if they do not immediately take control. It reflects a shift from one-sided selling to contested price action.

When supported by proper context, confirmation, and disciplined risk management, the Inverted Hammer can serve as an early signal that bearish momentum is weakening and a potential reversal may be developing.

Explore Inverted Hammer setups using our tools:

👉 Candlestick Pattern Scanner

Let confirmation decide the outcome — not hope.