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Candles scan

Hammer Candlestick Screener

This scan finds stocks that printed a hammer candle on the latest day while trading below their 50-day moving average, so the hammer comes after a fall.

Run this scan in the live demoFree, no sign-up. The demo uses made-up sample data.

The exact rule

Type this in Chalni: hammer and close below 50 day sma

  1. Hammer
  2. Close < SMA(50)

Find US stocks where today shows a hammer; and the closing price is below the 50-day simple moving average.

Formula view
pattern(hammer)
AND close < sma(close, 50)
Example chart: Hammer after a fallDaily candles of a made-up sample stock with 50-day SMA. The shaded day is the day the scan fired.
  • 50-day SMA
  • Shaded day: the scan fired
Example from Chalni's made-up sample market, not a real stock. It shows the most recent time this scan fired in the sample US market, picked whether or not the trade worked.

What it means

A hammer has a small body near the top of the day's range and a long lower wick. Sellers pushed the price well down during the day, but buyers pushed it back up by the close. After a decline, that rejection of lower prices can be an early sign of a bottom.

Chalni's exact rule: the lower wick is at least twice the size of the body, and the upper wick is no more than 15% of the day's range. The colour of the body does not matter.

How traders use it

  • Many traders wait for confirmation: the next day closing above the hammer's high.
  • The hammer's low is a natural stop level.
  • Hammers at support, such as an old low or the 200-day average, get more attention.

Watch out for

  • A hammer in the middle of a sideways range means little.
  • One candle is one day of trading. Confirm it with volume or with the next day.

Test it before you trust it

Every scan in Chalni sits an exam. First it runs on older data, the practice: each time it picks a stock, the stock is held for 10 trading days and 0.2% is paid in costs. Then it runs on newer data it has never seen, the exam. A scan that only works in practice has just memorised the past.

See the practice and exam results for this scan in the demo (on sample data; real data comes at launch).

Questions

Is a hammer candle bullish?

After a decline it is seen as a possible bullish reversal, because buyers rejected lower prices. It needs confirmation from the next candles.

What is the difference between a hammer and a hanging man?

They look the same. A hammer comes after a fall (a possible bottom); a hanging man comes after a rise (a possible top).

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