Characteristics of the Hanging Man pattern
The hanging man belongs to a family of single-candle formations.
This candle is created when the open, high, and close are of a similar price, while there is a long shadow to the downside. Ideally, this shadow, or wick, should be at least twice the length of the body.
Similar to other candlestick patterns
, the hanging man is a representative of the current market sentiment.
As it is a bearish formation, it occurs at the top of an uptrend. Despite a high closing price, a long shadow that extends lower signals that an increasing number of bears are participating in the market.
Thus, the rise of bears can only occur at the expense of the bulls, who have been in control of the price action up to this point. An extensive selling pressure was present during a part of the session which created a wick, although the bulls forced a close near the session’s high.
The message is simple: don’t be surprised if the reversal takes place soon.