The hanging man candle resembles an umbrella in shape. It is a type of spinning top candle formation. Similar to hammer candle, the hanging man candle has a small real body at the top of the candle followed by a long lower shadow. Hanging man candle is a powerful reversal indicator if the formation happens after a long uptrend for a stock. It has bearish implications. The market tries to stall further rise. There could be vital factors contributing to the weakness of the stock at these instances. If this happens along with strong volume, then it leads to a possible reversal of the uptrend.
5 important points to note about the hanging man candle:
The hanging man formation if it happens after a long uptrend, could be a significant indicator of a reversal.
The real body of the hanging man candle should be as small as possible.
The color of the hanging man candle is insignificant.
The length of the lower shadow should be atleast twice the length of the real body.
There shouldn’t be any upper shadow ideally. Even if it is there, should be very small.
