Japanese candlesticks - Hanging man
Definition: A hanging man structure is comprised of a single Japanese candlestick. The candlestick has a small body, bullish or bearish, with a long low wick which is at least twice as long as the body. The closing price of the next candlestick must be lower than the lowest point of the hanging man.
Characteristic: A hanging man often forms after a significant increase characterized by several large green Japanese candlesticks. If the pattern occurs after a bearish trend, it is called a hammer.
Significance: A hanging man is a reversal pattern, it indicates a reversal of the bearish trend. This reflects increasing selling pressure, with a temporary takeover during the candlestick’s life.
Note: It is preferable if the candlestick is bearish, this reinforces the relevance of the hammer but a bullish candlestick does not invalidate the pattern. The ideal is a hanging man doji. The larger the shadow and the smaller the body, the stronger the pattern.
Hanging man doji
Invalidation: If the next candlestick is not bearish or does not open on a bearish gap, the hanging man is invalidated.