Candle Stick Pattern - IBKR

This setup is based on a well-known candlestick pattern called the Hammer. As the name suggests, the candle resembles a hammer, and we place particular emphasis on long lower wicks, which indicate strong rejection of lower prices.

We prefer hammers where the wick extends into prior areas of resistance-turned-support (green box), as this reinforces the idea that buyers are actively defending key levels. That is exactly what we see in this example, with clear price rejection from a previously important area.

This technical setup is supported by strong fundamental analysis. Interactive Brokers (IBKR) has delivered solid EPS growth and has benefited from a sustained increase in customer numbers, providing confidence that the price action is occurring within a fundamentally robust business.

Entry: The trade is triggered on a break and close above the high of the hammer candle, confirming bullish follow-through. You can enter purely on the break of the candle but we like to wait for confirmation.

Stop-loss: The stop is placed below the low of the hammer’s wick, representing approximately a 7% risk. If this risk is too large, position sizing is adjusted accordingly rather than forcing a tighter stop.

It is common to see an initial push higher, followed by a retest of the entry level, before the next leg up develops. We’ll monitor how this setup evolves over time.