Chartered Market Technician Practice Exam 2025 – Complete Prep Guide

The correct answer is the Hammer. This candlestick pattern is identified by its long lower shadow, indicating that sellers pushed the price lower during the timeframe but were eventually overcome by buyers, who drove the price back up to close near the opening level. The small body, typically found at the top of the trading range, reflects a relatively small price movement between the open and the close, signifying indecision and potential reversal.

In the context of technical analysis, the presence of a long lower shadow demonstrates that the market tested lower prices but buyers entered significantly, suggesting support at that lower price level. A hammer pattern, especially when located at the bottom of a downtrend, can be a strong bullish signal, signaling that buyers are gaining momentum and a potential reversal may occur.

The characteristics of the other patterns mentioned differentiate them from the Hammer. For instance, the Bearish Engulfing pattern features a larger bearish candle that completely engulfs the preceding bullish candle, indicating a buyer-to-seller shift in momentum. The Evening Star is a three-candle pattern that signifies a bearish reversal after an uptrend, typically characterized by a small body candle (like a doji) between a large bullish candle and a large bearish candle. Dark Cloud Cover is also a