Pin Bar
Definition
A pin bar (also called a hammer, shooting star, or rejection candle depending on direction) is a single candlestick with a long wick and small body that signals strong rejection of a price level — the wick shows where price briefly spiked and was immediately rejected, with the body showing where it closed back near the open.
Example
“The stock hit resistance at $38.50 and formed a bearish pin bar — a small body at the bottom with a long wick up to $38.80. Sellers slammed the door at that level. I shorted the next candle's break of the pin bar low with a stop above the wick.”
Detailed Explanation
A pin bar tells a story about a battle between buyers and sellers at a specific level. The long wick is the "pin" — it shows where price ventured and was emphatically rejected. In a bearish pin at resistance, the wick going up shows buyers tried to push above the level, sellers overwhelmed them, and price snapped back down to close near where it opened. That snap-back is not random; it represents real selling pressure coming in and overwhelming buying interest. The longer the wick relative to the body, the more decisive the rejection.
Context is everything with pin bars. A bearish pin bar at a key resistance level (prior high, round number, moving average, VWAP) is meaningful. A bearish pin bar in the middle of an established uptrend on low volume is noise. The same candlestick pattern can be a high-probability reversal signal or completely irrelevant depending on where it forms and what the volume profile looks like. Before acting on a pin bar, ask: Does it form at a level that has significance? Is there elevated volume on the wick (showing real buyers/sellers entered)? Does it align with the larger trend or is it fighting a dominant move?
Entry and stop placement on a pin bar trade are straightforward. For a bearish pin bar at resistance: short the break of the body low (or the close of the next candle if you want confirmation), stop above the high of the wick (the rejection high), and target the next support level below. The wick itself gives you the invalidation point — if price pushes back above that rejection high with momentum, the pin bar's bearish thesis is wrong and you want to be out. The pin bar setup has clean structure, logical risk, and a specific level that tells you when you're wrong, which is exactly what you want in a setup.