CDL_CDL_INVERTEDHAMMER (Inverted Hammer)¶

Overview¶

The Inverted Hammer is a single-candle bullish reversal pattern that bullish reversal pattern with long upper shadow at bottom of downtrend. This pattern is used to identify potential trend changes and provides traders with entry signals when combined with proper confirmation.

Parameters¶

Parameter	Type	Default	Description
`open`	Array	Required	Array of opening prices
`high`	Array	Required	Array of high prices
`low`	Array	Required	Array of low prices
`close`	Array	Required	Array of closing prices

Parameter Details¶

Note: Array elements should be ordered from oldest to newest (chronological order)

OHLC Arrays - All four price arrays must have the same length - Minimum 1 candle required for pattern detection - More historical data provides better context for trend analysis

Usage¶

Basic Usage¶

require 'sqa/tai'

open =  [50.0, 49.5, 48.0, 47.5, 48.5]
high =  [50.5, 50.0, 48.5, 48.0, 49.5]
low =   [49.5, 48.5, 47.5, 47.0, 48.0]
close = [49.5, 48.5, 48.0, 47.5, 49.0]

pattern = SQA::TAI.cdl_invertedhammer(open, high, low, close)

puts "Inverted Hammer signal: #{pattern.last}"
# Output: 100 (pattern detected) or 0 (no pattern)

Understanding the Pattern¶

What It Measures¶

The Inverted Hammer pattern measures: - Reversal Potential: Shift in market sentiment and momentum - Market Psychology: Bears still in control but bulls testing resistance, potential shift - Trend Exhaustion: Signs that current trend is losing strength

Pattern Characteristics¶

Type: Single-candle bullish reversal
Trend Context: Must appear in downtrend
Signal: 100
Reliability: Moderate to High (with confirmation)
Best Timeframes: Daily, 4-hour charts

Trading Signals¶

Entry Signals¶

Primary Entry: Long when next candle closes above inverted hammer

Risk Management: - Stop Loss: Below the low of the inverted hammer - Target: Recent resistance or swing high - Risk/Reward: Aim for minimum 1:2 ratio

Confirmation Requirements¶

Strengthen the signal with: 1. Volume Confirmation: Increased volume on signal candle 2. Trend Confirmation: Clear downtrend established 3. Support/Resistance: Pattern at key price level 4. Next Candle: Following candle confirms direction

Best Practices¶

Optimal Use Cases¶

Market Conditions: After established trend with clear momentum
Timeframes: Most reliable on daily charts
Asset Classes: Stocks, forex, commodities
Volatility: Normal volatility environments

Combining with Other Indicators¶

RSI: Confirm overbought/oversold conditions
MACD: Verify momentum shift
Volume: Validate buying/selling pressure
Moving Averages: Confirm trend context

RSI - Momentum confirmation
MACD - Trend and momentum
Volume OBV - Volume confirmation