Hammer
A hammer is a candlestick pattern with a small body at the upper end of the trading range and a long lower wick at least twice the length of the body, suggesting that a significant intraday decline was rejected and prices recovered to close near the high. It has been observed on Nifty and individual stock charts as a historically notable pattern at potential lows.
The hammer formation reflects a specific intraday narrative: the market opened, declined substantially during the session (creating the long lower wick), and then recovered sharply to close near the open or higher. This recovery from the low is interpreted as evidence of demand entering the market at lower prices and overpowering the selling pressure that drove the initial decline.
For a hammer to carry analytical significance, the colour of the body (bullish versus bearish) is secondary to the context. A green hammer — where the close is above the open — is considered stronger than a red hammer, where the close is slightly below the open but still well above the low. The critical feature is the long lower wick and the small body near the session's high, regardless of the slight difference between open and close.
Hammers appearing at prior support zones, round-number levels, or after a sustained decline in Nifty or Bank Nifty were noted in technical analysis as potentially indicating a shift in short-term momentum. Analysts documented instances where hammer candles on weekly Nifty charts coincided with significant market lows, including the March 2020 COVID-19 low, though the reliability of the pattern as a prospective indicator was not established rigorously.
An inverted hammer — the mirror image, with a small body at the lower end of the range and a long upper wick — appears at potential lows but represents an attempt to rally that was partially sold back. It carries a less decisive narrative than the standard hammer and is typically given less weight unless confirmed by the next candle.
A common misconception is that a hammer candle guarantees a bottom. Like all candlestick patterns, the hammer has no predictive certainty. It reflects one session's price dynamics and can be followed by further weakness if the broader market conditions remain adverse. The pattern is most usefully treated as one piece of evidence that merits attention rather than a definitive reversal signal.