Inverted Hammer Candlestick Pattern: The Candles at Strategy's 2026 Low and Cloudflare's 2020 Pullback

On June 26, 2026, at its lowest price since February 2024, Strategy printed an inverted hammer. Bought at that close with a stop under its low, the trade risked 0.6%. By September 21 the stock was up 104.7%.

On September 8, 2020, 27.3% below its August record high, Cloudflare printed one. The risk was 0.7%. Five months later the stock was up 183.7%.

Neither stock has traded below its hammer's low since. Here is how to read an inverted hammer, where the stop goes, and how to find the next one.

What $10,000 became#

Cloudflare kept going: by Feb 9, 2021 it was up 183.7%, and $10,000 had become $28,373. Strategy's trade is not yet 120 sessions old. Prices are split-adjusted, as on the chart.

The inverted hammer in one table#

An inverted hammer is one daily candle with a long upper shadow, a small body near the bottom of the day's range and almost no lower shadow. Buyers pushed the stock well above the open and sellers took it back, but after a decline that push is the first sign of buyers.

These are the rules the VCP Scanner terminal uses to name an inverted hammer on a daily chart.

The body's colour does not matter. Strategy's and Cloudflare's were both red, each closing just under its open, and a green one counts the same.

The position rule matters most. An inverted hammer comes after a decline. The same shape after a rally is a different candle.

Same shape, different place#

The inverted hammer and the shooting star are the same candle in different places. A doji-sized body at a low still counts as an inverted hammer: Cloudflare's below was one. Turn the shape over and you have a hammer.

Example 1: Strategy (MSTR) at its 2026 low, Jun 26, 2026#

Open MSTR in the VCP Scanner terminal →

Strategy is the company formerly called MicroStrategy.

What followed:

• Next session (Jun 29): closed at 92.68, up 12.6% and already above the hammer's high of 87.67. Its low of 82.72 is the lowest Strategy has traded since.
• Ten sessions later (Jul 13): 92.10, +11.9%.
• Aug 24: 122.63, +49.0%.
• Sep 21: 168.50, +104.7%. That is 172 times the 0.50 risked on each share.
• The low of 81.81 was never broken. On Nov 3, 2026 Strategy closed at 135.63, 64.8% above the hammer's close.

With $500 at risk, the stop sized the trade at 1,000 shares, about $82,310: a stop 50 cents away makes a big position. At the Sep 21 close those shares were up $86,190.

Example 2: Cloudflare (NET) in its September 2020 pullback#

Open NET in the VCP Scanner terminal →

What followed:

• Next session (Sep 9): closed at 34.01, +3.2%. Its low of 33.21 is the lowest Cloudflare has traded since.
• Four sessions later (Sep 14): 34.83, the first close above the hammer's high of 34.76.
• Ten sessions later (Sep 22): 39.87, +21.0%.
• Nov 30: 75.08, +127.9%.
• Feb 9, 2021: 93.46, +183.7%. That is 247 times the risk on each share.
• The low of 32.70 was never broken. On Nov 3, 2026 Cloudflare closed at 273.62, 730.7% above the hammer's close.

With $500 at risk, the stop sized the trade at 2,040 shares, about $67,198 (the low was 32.695, shown rounded as 32.70). At the Feb 9, 2021 close those shares were up $123,461.

Where an inverted hammer counts: key levels#

An inverted hammer on a level is a test of that level. In the terminal, the Only at a key level switch is on by default and keeps the inverted hammers that close back above one of these:

Strategy's and Cloudflare's both came at fresh lows, on none of these levels. To see inverted hammers like these, turn Only at a key level off.

The stages tell two different stories. Strategy was in Stage 4, Stan Weinstein's declining stage, so its hammer marked the end of a downtrend. Cloudflare was in Stage 2, the advancing stage (above a rising 30-week average), so its hammer marked the low of a pullback inside an uptrend.

How to trade an inverted hammer#

1. Find the low. An inverted hammer comes after a decline. Look for it at a prior low, a rising average or a fresh multi-month low, like Strategy's in 2026 and Cloudflare's in 2020.
2. Check the shape. The upper shadow is at least twice the body, with little or no lower shadow. Strategy's was 4.8× and Cloudflare's 14.2×.
3. Choose your entry. Some traders buy the hammer's close. Others wait for a close above its high, because the hammer itself closed near its low. Strategy gave that close the very next session and Cloudflare four sessions later.
4. Put the stop under the low. Under the hammer's low, or under the lowest low of the test if price went lower earlier in it. The terminal calls this "the low, test included". With the close near the low, the risk is small: 0.6% and 0.7% here.
5. Size from the stop. Shares = money at risk ÷ (entry − stop). With $500 at risk on Strategy: 500 ÷ (82.31 − 81.81) = 1,000 shares.

Find inverted hammers on any chart in VCP Scanner#

• Open a stock in the terminal, for example MSTR or NET.
• Open Candles in the chart toolbar and tick Inverted hammer, or use the Reversals quick pick for every classic reversal candle.
• Only at a key level is on by default. Turn it off to see every inverted hammer on the chart.
• The chart jumps to the latest inverted hammer. A dot marks each one under its low, and the selected one shows its stop on the price scale.
• The inspector lists the close, stop, risk to stop, level, volume and stage. Walk through the others with the ← and → keys.
• Mark the ones you care about with the drawing tools. The arrows in the charts above are the Arrow Marker (Alt+A): click where the arrow starts, then click the candle.

Candles are free, on daily, weekly and monthly charts.

Bottom line#

• An inverted hammer is a long upper shadow after a decline: buyers pushed the price up for the first time, even though sellers took it back by the close.
• Strategy's marked its 2026 low and Cloudflare's the low of its 2020 pullback. They risked 0.6% and 0.7%, and the stocks rose 104.7% and 127.9% within 60 sessions.
• The hammer's low is the stop. It defines your risk before you take the trade.

Data: VCPScanner daily market data through Nov 3, 2026, split-adjusted. The examples are for education, not recommendations.