Hammer Candle

 Hammer Candle is one of the most powerful bullish reversal signals, especially when trading NSE stocks and indices like NIFTY 50, Bank Nifty, and Midcap stocks.


What is a Hammer Candle?

A Hammer is a single-candle bullish reversal pattern that forms after a downtrend.

Key Characteristics:

  • Small real body at the top of the candle

  • Long lower shadow (at least 2–3 times the body)

  • Little or no upper shadow

  • Appears after continuous price decline

📌 It shows that sellers pushed the price down, but buyers stepped in strongly and closed near the highs.

Psychology Behind the Hammer

In NSE stocks, the Hammer often appears near:

  • Strong support zones

  • Previous demand areas

  • Moving averages (50 EMA / 200 EMA)

During the session:

  • Bears dominate initially

  • Bulls absorb selling pressure

  • Price recovers sharply before close

This shift indicates trend exhaustion and a potential trend reversal.

Hammer Candle in the Indian Market (NSE)

The Hammer pattern works very well in:

  • Large-cap stocks (Reliance, TCS, HDFC Bank, Infosys)

  • Index charts (NIFTY 50, Bank Nifty)

  • High-volume stocks on NSE

It is especially effective on:

  • Daily timeframe for swing trading

  • 15-min & 5-min charts for intraday trading

Types of Hammer Candles

1. Bullish Hammer

  • Appears after a downtrend

  • Indicates possible upward reversal




2. Inverted Hammer

  • Small body at the bottom

  • Long upper shadow

  • Needs confirmation candle next day




How to Trade Hammer Candle on NSE

Step 1: Identify the Trend

  • Ensure the stock or index is in a clear downtrend

Step 2: Spot the Hammer at Support

Look for:

  • Horizontal support

  • Trendline support

  • 200 EMA / 50 EMA

  • Previous swing low

Step 3: Wait for Confirmation

  • Next candle should be bullish

  • Preferably closing above Hammer high

Step 4: Entry, Stop Loss & Target

Entry:

  • Buy above the high of Hammer candle

Stop Loss:

  • Below the low of Hammer candle

Target:

  • Nearest resistance

  • 1:2 or 1:3 risk–reward ratio

Example: Hammer Candle on NIFTY 50

  • NIFTY falls for 4–5 sessions

  • Forms Hammer near previous support

  • Next day opens strong and breaks Hammer high

  • Result: Short-covering + fresh buying → Rally

This pattern is often seen near expiry days, event-based corrections, or panic selling zones.

Common Mistakes Traders Make

❌ Trading Hammer without a downtrend
❌ Ignoring volume
❌ Not waiting for confirmation
❌ Placing tight stop-loss inside the candle

Best Indicators to Combine with Hammer

For higher accuracy in NSE trading, combine Hammer with:

  • Volume spike

  • RSI divergence

  • Moving Averages (50 & 200 EMA)

  • Support & Resistance levels

Hammer Candle: Intraday vs Swing Trading

Trading StyleTimeframeReliability
Intraday5–15 minMedium
Swing TradingDailyHigh
PositionalWeeklyVery High

Final Thoughts

The Hammer Candle Reversal Pattern is a simple yet powerful tool for NSE traders. When used with proper trend context, support levels, and confirmation, it can deliver high-probability trades in both stocks and indices.

Remember:

“A Hammer is not a buy signal by itself—confirmation is the key.”

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