Hammer

Description

A hammer is a single candlestick reversal pattern. It has a real body at the upper end of the trading range and a long lower shadow. A hammer may have an upper shadow, but a hammer with a shaven top is more significant. A black bodied shaven top indicates a rally could not recover from a sell-off. By contrast, a white bodied shaven top indicates the rally not only recouped the sell off, but made a modest gain as well. Hence, this reversal pattern is slightly more bullish if it has a white real body.

The Hammer's companion pattern is the Hanging Man.

Formula

Hammer(INPUT, Stringency=6, UpperShadowPercentage=20, LRRange=10, LRType=3, NewLowRange=2)=begin

  retval = NONUM

  targetBar = 0

  uShadow = UpperShadow($1,targetBar)

  if Bearish($1, targetBar, LRRange, LRType) == TRUE then begin

    if Stringency >= 7 then retval = '7'|clr_green|below|vertical|arrow|ftiny

    if RealBodyLow($1, targetBar) > BodyMidPoint($1, targetBar) then begin

      if Stringency >= 6 then retval = '6'|clr_green|below|vertical|arrow|ftiny

      if LowerShadowLen($1, targetBar) >= (2 * Abs(RealBodyLen($1, targetBar))) then begin

        if Stringency >= 5 then retval = '5'|clr_green|below|vertical|arrow|ftiny

        if uShadow <= UpperShadowPercentage then begin

          if Stringency >= 4 then retval = '4'|clr_green|below|vertical|arrow|ftiny

          if uShadow == 0 then begin

            if Stringency >= 3 then retval = '3'|clr_green|below|vertical|arrow|ftiny

            if vchart(disttomin($1.low,0,NewLowRange)[-1]) < NewLowRange then begin

              if Stringency >= 2 then retval = '2'|clr_green|below|vertical|arrow|ftiny

              if WhiteBody($1,targetBar) == TRUE then begin

                retval = 'Hammer'|clr_black|below|vertical|arrow|ftiny

              end

            end

          end

        end

      end

    end

  end

  retval

end

Parameters

INPUT

The INPUT directive makes this formula available as a Formula Overlay. INPUT refers to the instrument in the chart.

Stringency

The Stringency argument is used by nearly all candlestick overlays. It controls how many tests must pass in the evaluation of a Hammer. The lower the number, the more strict the interpretation.

The Stringency argument is an overlay parameter. You can adjust it using the Parameters dialog. The default is 6.

UpperShadowPercentage

The UpperShadowPercentage parameters represents a percentage. This parameter serves as the basis for determining whether how long a hammer's upper shadow can be. The smaller the value the more stringent the test. The default is 20, or twenty percent.

LRRange

The Hammer overlay uses the LR() function with either a continuous or quadratic calculation to determine how the market is trending. The LRRange (Linear Regression Range) parameter is the number of points in the Linear Regression calculation. The default is 10.

LRType

The LRType parameter has two possible settings: 2 and 3, or continuous linear regression and quadratic linear regression, respectively. The default is 3, or quadratic.

NewLowRange

The NewLowRange represents a number of bars. One of the criteria for a hammer is that it sets a new low. The NewLowRange parameter enables you to define a range in which a new low can be set. The smaller the value, the more stringent the test. The default is 2, or two bars.

Return Value

The return value is a string plot and varies depending on the value of the Stringency parameter.  The lower the number, the stronger the pattern.

Bullish indicators are rendered in green below the candlestick.

The string plot for a fully qualified Hammer is "Hammer" rendered in black below the candlestick.

Examples

Comments

NA