A Bullish Hammer candlestick often occurs at the bottom of a trend or during a downtrend and it is called a Hammer since it is hammering out of a bottom. It has a long lower shadow and a small body at or very near the top of its daily trading range.

Bullish hammer candlestick pattern

The psychology of the Bullish Hammer is that after the day’s decline stops, the market reverses and returns to the high of the day. This incredible intra-day rally reduces the previous bearish sentiment causing short traders to feel increasingly uneasy with their bearish positions.

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