What indicates a bullish signal after seeing an inverted hammer?

The bullish signal following an inverted hammer is indicated by a close above the real body of the inverted hammer. An inverted hammer typically appears at the end of a downtrend and signals a potential reversal. The anatomy of this candle shows a small real body at the lower end of the trading range with a long upper shadow, suggesting that buyers attempted to push prices higher during the session but were countered by sellers before the close.

When the price closes above the real body of the inverted hammer on the subsequent trading day, it reinforces the idea that buyers have gained enough strength to overcome selling pressure, suggesting bullish sentiment in the market. This upward movement confirms that the market may be shifting from bearish to bullish, thereby substantiating the reversal hinted at by the inverted hammer pattern.

Other factors, such as a gap up or consolidation period, can also influence price action but are not as directly indicative of the immediate bullish reversal that a close above the inverted hammer's real body provides.