Hanging Man Candlestick Pattern Physical Description:

The Hanging Man Candlestick Pattern gets it’s name from appearing like a hanging man and can only occur after after an established uptrend. This chart formation is a top reversal indicator that appears as either a white or black candle with no upper shadow and a long lower shadow.

Hanging Man Candlestick Pattern Criteria:

• Appears in the context of an uptrend

• No upper shadow

• Lower shadow must be 2-3 times the length of the real body

• Candle can be either black or white

Hanging Man Candlestick Market Psychology:

The Hanging Man Candlestick is what’s more generically known in candlestick analysis as a “spinning top.” In short, these types of candle lines indicate “indecision” or “confusion” between the buyers and the sellers. In this specific chart formation, the buyers have been in control and have been taking the stock price higher as indicated by the previous uptrend.

However, when the Hanging Man Candlestick forms this indicates that the buyers either ran out of steam for the day or ran into sellers that prevented a significant continuation of the previous trend.

The absence of an upper shadow confirms that the buyers didn’t have the strength the move price higher at any time during the trading day. The presence of a long lower shadow demonstrates that there was a sell off  at some point during the trading day which indicates that buyers may be losing control of the trend.

This same candle shape forming at the bottom of a downtrend is called the “Hammer Candlestick Pattern.”

Hanging Man Candlestick Trading Implications:

Look for a close below the low of the Hanging Man Candle real body for confirmation of a reversal. Used in combination with other technical analysis techniques these Candlestick Patterns can help traders and investors identify areas of trend reversals and trade accordingly.

Factors that Increase The Strength Of a Hanging Man Candlestick:

• Significant resistance levels at or just above the the top of the formation

• An extended run up in price with little or no “rest” days

• It is very important with this candlestick pattern to wait for confirmation of a close below the hanging man real body along with a combination of other Technical Analysis indicators to help make trading decisions.