A Hammer - 60% Chance of a Reversal

Hammer is a candlestick that has a small real body with a long lower shadow. Dow formed a hammer at the closed of Tuesday trading. Hammer is a bullish reversal pattern that formed after a decline. It can mark bottom or support level. A confirmation candlestick is required for reversal confirmation.

Based on study carried out by Bulkowski, probability of a reversal for hammer pattern is 60%. Overall performance ranking is 65 out of 103 candlestick patterns where 1 is the best.

Hypothesis No. 1 - A small rebound to form vi of A

Hypothesis No. 2 - A big rebound to form III

Hypothesis No 3 - A medium rebound to form B of II

Dow up about 40 points after 2 hours of trading on Wednesday morning. At one stage it gained about 135 points. Hopefully Dow can give a confirmation candlestick at the close to signal a reversal.