[Summary]
A tongkachi is a candlestick with a long lower whisker and the body on the top.
If it appears at the end of a declining market, it will be seen as a sign of buying at the low price, making it a candidate for bottoming out.
However, just because a hammer appears doesn't necessarily mean there will be a backlash. It is important to check the volume and next bar.
What is Tonkachi?
A hammer is a candlestick that is also called a hammer overseas.
The shape consists of a short body and long lower whiskers.
This indicates that the stock was sold heavily during the trade, but was bought back towards the closing price.
Why is this a sign of bottoming out?
In a down market, selling has the upper hand.
The appearance of a long beard means that there are investors who want to buy at a low price. However, we will also see how far it has returned at the closing price.
In particular, a hammer with high trading volume can be seen as an indication that selling is coming to an end.
Points to note
Where the hammer comes out is important.
If it appears in a low price range, it is likely to be a sign of bottoming out, but if a similar shape appears in a high price range, it is a warning sign. Even if the form is the same, the meaning will be opposite if you change the location.
The points you want to check are as follows.
- Is it coming out after a decline?
- Do you have a long lower beard?
- Is trading volume increasing?
- Will the positive line continue the next day?
Summary
A hammer is a candlestick that indicates the possibility of buying at a low price.
This can be used to find candidates for bottoming out, but the basic idea is to use it to see if the rebound continues in the next bar.