JPMORGAN: hammer formations

JPMORGAN: hammer formations

2022-12-20 • Updated

Composition and use

We discussed previously some of the trend reversal chart formations. Hammer is one of them. Speaking about its composition, it has two parts: a head and a grip. These are essential to interpret it correctly. Normally, it a hammer's head is lower as if it was falling - that's a bearish reversal coming. If the head is above and the grip is below - bulls are taking over. Let's check through some particular examples.


Classic example

An ideal scenario is a clear green/bullish hammer with a head pointing upwards. That’s a classic example of a hammer formation predicting an upward reversal. In the M15 chart of JPMorgan stock price, this reversal is quick to come – and quick to leave.


For a downtrend, we have the same logic. A clear red/bearish hammer with a head pointing down – that’s a sign of a downtrend. In this particular chart, it comes immediately after the hammer but stops a few candlesticks later.


Inverted color example

There are cases when the color of the hammer candlestick contradicts its direction. In this case, we disregard its color and take its direction as a basis for interpretation.

In the JPMorgan chart below, we see hammer 1 formed as a green/bullish candle. Nevertheless, its head points downwards. Hence, leaving the color aside, this candle should be taken as a bearish sign – and so it eventually fulfills. The second hammer formation comes here as a red/bearish candle. But as long as its head points upwards, it is a bullish sign – and so it happens straight after.  



Sometimes, hammer candles come one after another. That’s a stronger confirmation of the observed direction if both agree where they point at. In the below example, a red/bearish and a green/bullish hammer stand one next to another, and both have their heads point upwards: that means both confirm the upside potential. Immediately after, it takes place, although for not too long.


Weak outcome

You will encounter a lot of cases when the trend change predicted by hammer formation is not only short-lived but also weak or even insignificant. On the M15 chart of JPMorgan below, we see two hammers pointing upwards. In theory, that should come as a strong sign of a bullish reversal. Eventually, there is indeed a reversal but it is so weak that the highest point of this upward correction hardly reaches the middle of the first hammer’s head.


Opposite outcome

You will also come across hammer formations that result to have no predictive power. In the chart below, the observed hammer is supposed to bring a bearish reversal, but after just two bearish candles not even crossing the low of the hammer, the trend goes upwards.



Hammer formation is ease to notice and use. However, it does have its limitations in terms of its predictive probability. It may be said that it works more often than it doesn’t, that’s why it is a good instrument in trader’s toolkit.  

                                                                                                   USE IT


Latest news

USD: Powell Speaks on Cutting Interest Rates
USD: Powell Speaks on Cutting Interest Rates

Jerome H. Powell, the Federal Reserve chair, stated that the central bank can afford to be patient in deciding when to cut interest rates, citing easing inflation and stable economic growth. Powell emphasized the Fed's independence from political influences, particularly relevant as the election season nears. The Fed had raised interest rates to 5.3 ...

WTT: Currency Pairs To Trade In April
WTT: Currency Pairs To Trade In April

Hello again my friends, it’s time for another episode of “What to Trade,” this time, for the month of April. As usual, I present to you some of my most anticipated trade ideas for the month of April, according to my technical analysis style. I therefore encourage you to do your due diligence, as always, and manage your risks appropriately.

Deposit with your local payment systems

Data collection notice

FBS maintains a record of your data to run this website. By pressing the “Accept” button, you agree to our Privacy policy.


A manager will call you shortly.

Change number

Your request is accepted.

A manager will call you shortly.

Next callback request for this phone number
will be available in

If you have an urgent issue please contact us via
Live chat

Internal error. Please try again later

Don’t waste your time – keep track of how NFP affects the US dollar and profit!

You are using an older version of your browser.

Update it to the latest version or try another one for a safer, more comfortable and productive trading experience.

Safari Chrome Firefox Opera