Reversal Candles: Hammer, Engulfing, Doji and Shooting Star
Named single- and two-bar shapes that describe a session's balance between buyers and sellers. They describe a condition; the word reversal in their names promises more than they deliver.
MadStockAlerts Research · Updated August 28, 2026
What to take away
- Each shape describes what happened within one or two periods, nothing further.
- Location matters more than shape: the same candlestick means different things in different places.
- They occur constantly, so in isolation they carry very little information.
- The names are descriptive labels, not forecasts.
- A pattern exists at the timeframe you are looking at and nowhere else.
- A shape that appears forty times a year has to be measured against how often the outcome occurs without it.
MAD Academy Training Video · 0:45
One Candle Is Not a Reversal
Hammers, engulfings, dojis and shooting stars describe a single session's balance. Where they appear is what gives them weight.
This lesson is part of a Stock Alerts + Tools plan.
The shapes
| Name | Shape | What happened in the period |
|---|---|---|
| Doji | Open and close nearly equal | Contested and unresolved |
| Hammer | Small body at the top, long lower wick | Sold off, then bought back before the close |
| Shooting star | Small body at the bottom, long upper wick | Rallied, then sold back before the close |
| Bullish engulfing | An up body covering the prior down body | Reversed the entire previous period |
| Bearish engulfing | A down body covering the prior up body | The mirror image |
| Marubozu | Long body, almost no wicks | One side controlled the whole period |
Every one of these is a description of the four prices and nothing more. The names are memorable, which is useful for communication and misleading about how much they contain.
Location is most of the meaning
A hammer after a sustained decline into a level that has held before is a different observation from a hammer in the middle of a range. The candle is identical; the context is not, and the context is where nearly all of the information lives.
Scroll the chart sideways to see all of it.
This is why single-candle patterns are unreliable in isolation and reasonable as one input among several. They mark that something was contested at a particular place, and the place is what makes it worth noticing.
The useful order of operations is therefore backwards from how these are usually taught. Identify the level first, then look at what the candles did there, rather than scanning for candle shapes and asking afterwards where they occurred.
The frequency problem
Doji occur constantly. Any liquid stock produces dozens a year, and the vast majority precede nothing at all. A shape that appears this often cannot carry much information on its own, whatever its name suggests.
A useful sanity check on any candle pattern is to count how often it appears in a year of the security's history and how often it preceded the move it is supposed to indicate. That count is rarely done and almost always disappointing.
Timeframe changes the shape
A hammer on a daily chart is composed of many intraday bars, none of which is a hammer. The same session on a weekly chart may not be visible at all.
The pattern exists at the timeframe you are looking at and nowhere else, which is worth remembering before treating it as a property of the stock rather than a property of the chart setting.
The shapes, and what each is describing
Each named shape is a particular arrangement of the four prices. Stripped of the vocabulary, each describes something specific about how a session went, and that description is the part that can be reasoned about.
| Name | The arrangement | What the session did |
|---|---|---|
| Hammer | Small body at the top, long lower wick | Sold off hard, then recovered by the close |
| Shooting star | Small body at the bottom, long upper wick | Rallied hard, then gave it all back |
| Doji | Open and close nearly equal | Traded a range and ended where it started |
| Bullish engulfing | A body covering the previous bar's, closing up | Reversed the whole of the prior session |
| Marubozu | Body with almost no wicks | Moved in one direction all session |
Reading the third column rather than the first is what makes the vocabulary useful. A hammer is a session where sellers pushed price down and buyers took it back, and whether that matters depends entirely on where it happened and on how much volume was involved.
The shapes are also timeframe artefacts. A daily hammer is four one-hour bars that happen to be arranged that way, and on the hourly chart there is no hammer at all. Nothing about the trading changed; the aggregation did.