TraderX,
First, its a mistake to demand any candle pattern be 100% perfectly formed.
For example, I've taken many a successful short trade based on an 'imperfect' dark cloud cover. What is important is if the market forces that create a pattern are roughly equivalent.
Hammers open with a gap down, and never close the gap during the trading day.
Secondly, I believe your assertion is incorrect. A hammer does have to be isolated from the previous range by a gap.
The two examples I provided would certainly be viewed as hammers by most people watching such things - small real body contained within the upper half/third of the candle, with a tail, the longer the better. The market dynamics that cause it to be drawn indicate a significant decline during the bar followed by a significant rally. A white hammer would be viewed as even more positive, as it means the rally was able to overcome and hold the day's open.
Having said all this, in a down trend hammers are meant to be broken. But perhaps not this time, or perhaps not for a period of time.
EDIT: I use candlesticks sparingly lest I neglect a full featured diet of tools. Seriously, I could continue on with bars only; I do find they add some context here and there but the common patterns are just that - common, and easily spotted, and frequently these days they have less meaning.
But I'll take a good dark cloud cover any day ;) |
