Hanging Man is a bearish reversal candlestick pattern with a longer lower shadow and smaller real body. This candlestick pattern appears at the end of an uptrend, indicating further weakness in price movements.
Hanging Man is formed when the bulls raised prices and are now unable to apply further pressure. There is no upper shadow and the lower shadow is twice the length of its body. Technical analysis on hanging man model gives traders the opportunity to close a buy position and enter a short position
When the opening price, the highest price, and the closing price are approximately the same, a hanging man form will be formed, just like a hammer. In addition, there is a very long lower shadow, which should be at least twice the actual length of the body.
When the high and open prices are equal, a bearish red hanging candle forms. This pattern is considered a stronger bearish signal than when the high and close prices are the same, forming a green hanging man.
Although the green candlestick is still bearish, it is considered less bearish due to the close of the day.
Here are some points to consider when identifying Hanging Man pattern on a candlestick chart:
For some traders, the confirmation candle the next day, coupled with the fact that the uptrend line support was broken, gave a potential signal to go short.
It is important to reiterate that technical analysis on hanging man patterns are not a sign of potential shorting; Other indicators should be used to determine to sell signals.