A small body at the bottom of a long upper wick, appearing after a decline. Buyers pushed price well above the open and could not hold it — but the attempt itself is the signal.
The upper wick should run at least twice the height of the real body, with little below. Read it as a failed rally that nonetheless shows buyers willing to bid a falling stock, which had not been true on the preceding days.
Context is everything, because the identical shape after a rally is a shooting star and means the opposite. The scan lists a stock here only when it was below its 20-day average beforehand.
This is among the weaker single-candle signals on its own. It carries far more weight when the next session opens above the inverted hammer's body and holds.
It fails frequently, and more often than the plain hammer. A rejected rally in a downtrend is, after all, still a rejected rally — sellers did win the session's close.
Intraday news that is later walked back produces this shape routinely: a spike on a headline, then a fade as the detail emerges. The candle looks identical whether or not anything changed.
Because both this and the shooting star share one shape, misreading the prior trend inverts the meaning entirely. That is the single most common error with this pattern.