It is Japanese candlestick pattern found at downtrend and usually signal a reversal trend. It is called shooting bar, if found at uptrend. The pattern is comprises of short lower body and long upper wick, which is twice the size of the body. The body of the candle is formed at lower end with no wick.
The long upper wick of candle show that, at some point, the buyers drove the price above up to some level but selling pressure drove the price back or close to its opening at the time of its close. The candle close above its opening price which indicate that selling pressure was not enough to bring the price down to its opening.
To identify the inverted hammer candlestick pattern, you need follow this criteria:
- Candle must formed at downtrend
- The upper wick must be twice the size of real body
- No or very small wick with lower real body
- The real lower body should be formed close to its opening
- Color of lower real body is not important, it can be red, green, white or black.
Remember that, inverted hammer alone is not a strong reversal signal to enter in trade. For best results you must have a look at other technical indicators to confirm the market trend.