Hanging Man 

This is a bearish or bullish continuation Signal If Occurs after a significant uptrend. The body could be Red or Green, This Candlestick tells you to go short after confirmation in preceding candle. This is same as Hammer but this should form at the end of an uptrend. This comes under Bearish Reversal Candlestick Pattern. This doesn’t indicate that Sellers have taken full control but simply indicates that sellers are trying to pull the price down. It can form in any timeframe. The larger the time frame the more impactful hammer candle can be considered.

 

Criteria

The Body of the candle should be small and tail (Lower Shadow) should be at least twice as long as the body, While Upper Shadow should be nil or very small. It should be formed at the end of an uptrend (Higher Highs candle would be more helpful in decision making).

 

Confirmation

Hanging Man candle doesn’t alone gives the confirmation of selling activity. Next Candle after Hanging Man should close below midpoint of Hanging Man candle. If the hanging man candle is red, then it gives more confirmation about the bearishness in coming days. If the next two candles are forming highers high then its a confirmation of bullish continuation pattern.

How To Trade

Positional Trades

If you are doing an EOD analysis and you find hanging man in any daily or weekly chart then you should wait for confirmation next day. After getting confirmation you can trade on the scrip positionally after finding possible support/resistance levels.

In the above Siemens daily chart, Hanging Man was formed at an uptrend and next candle itself closed much lower than the Hanging Man’s low. Positionally you can short these kinds of scripts with Stoploss higher than the Hanging Man’s high.

Intraday Trades

If you find hanging man formation in any scrip which is in uptrend then it gives sign of reversal. This can happen in any time frame. The use of pivot points for this purpose is more helpful. Suppose you found some scrip which is up by more than 1.5% or 2% and testing it’s levels at Pivot Point R2 or R3 (for some scripts this can happen at any pivot points, the main criteria is that script should be in uptrend), then you can take your position after confirmation mentioned above.

In the above 5min chart of CONCOR, you can see hanging man was formed at Pivot Point R2 after considerable uptrend and next candle also closed below close of hanging man. This gave us a very perfect sign to go short. after next candle formation, we can go short by putting our stoploss at high of hanging man candle or high of previous candle to hanging man (whichever is higher).

How to find such scripts

You can use our Fast Intraday Screener to find which scripts which is near any support pivot points and you can keep observing it, if you get above setup you can go short on such scripts.

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