Hanging man candlestick formation

Hanging man is a bearish candlestick pattern that forms at the end of an uptrend. It is created when there is a significant sell-off near the market open, but buyers are able to push this stock back up so that it closes at or near the opening price. Generally the large sell-off is seen as an early indication that the bulls (buyers) are losing control and demand for the asset is waning.

A hanging man can be confirmed by a bearish gap between the real body of the hanging man and the open on the next session. In other words, the investor should look for the next session opening lower than the real body of the hanging man. The greater the gap, the stronger the signal.

A hanging man may be a stronger signal if the subsequent session shows a black real body with a close lower than the close of the Hanging Man.

A hanging man may be a stronger signal if it is followed by another, well-formed hanging man in the next session.

The longer the lower shadow of the hanging man the greater the significance of the pattern.

The smaller the real body and the upper shadow the more significant the pattern.

This formation does not mean that the bulls have definitively lost control, but it may be an early sign that the momentum is decreasing and the direction of the asset may be getting ready to change. Hanging man formations can be more easily identified in intraday charts than daily charts and are a very popular formation used by day traders.