Shooting Star Candlestick: What You Need to Know
The shooting star candlestick is visually indistinguishable from the inverted hammer candlestick. However, the key difference lies in where they are formed – the shooting star is formed only after the price has moved up, while the inverted hammer forms after the price has moved down. It’s important to get confirmation on the third candlestick being bearish. This creates an evening star pattern, which is a reliable bearish reversal pattern. When I first started learning about candlestick chart patterns for trading, the shooting star bearish candlestick patterns was one of the most distinct shapes that stood out to me.
- Buyers initially drove prices higher, but sellers took over, bringing prices back down near the open.
- The shooting star is recognized by a single candlestick that forms after an uptrend.
- Essentially the opposite of a hammer candlestick, the shooting star rises after opening but closes roughly at the same level of the trading period.
- Despite the small correction on the way down, the shooting star reaches the target of three times the size of the candlestick.
Trading Futures and Options on Futures involves a substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. Opinions, market data, and recommendations are subject to change at any time. A lengthy upper wick emphasizes that buyers drove the price much higher than the open before being repelled. Meanwhile, the evening star and morning star are three-candle formations that take more time to develop but often provide more confirmation through their structure.
What is the Shooting Star pattern?
It can be considered trustworthy only if it is used in conjunction with other technical analysis indicators. For our example, let’s take a look at how you can trade pivot levels with a shooting star pattern. By identifying a pivot, we know where to expect a shooting star, creating a potential bearish reversal.
In conclusion, the Shooting Star pattern is a valuable tool in a trader’s arsenal. In summary, while the shooting star and inverted hammer may appear similar at first glance, their market implications are markedly different. Recognizing the specific pattern and its context is essential for traders aiming to predict future market directions accurately. In essence, the shooting star pattern is a crucial market signal that warrants careful attention. It doesn’t call for hasty decisions but rather advises a thoughtful reexamination of existing strategies in anticipation of a possible shift in market dynamics.
As it is a top trend reversal pattern, the Evening Star pattern is a bearish pattern that should only be considered when it appears in an established uptrend. Thus, the Star in the Shooting Star pattern takes the form of an Inverted Hammer rather than a small Doji or a Spinning Top as in the Evening Star. It may be surprising, but the origins of the shooting star are rooted in Japanese candlestick patterns and charting techniques, which date as far back as the 17th century.
See our Terms of Service and Customer Contract and Market Data Disclaimers for additional disclaimers. Always do your own careful due diligence and research before making any trading decisions. The structure of Shooting Star Candlestick is almost like an inverted hammer. Our maximum loss will be equal to the distance between the level we short HPQ and the level of the stop loss order.
Inverted Hammer Example
- On July 15, 2024, the price was moving upward throughout the day.
- Everything that you need to know about the Shooting Star candlestick pattern is here.
- The upper shadow must be at least twice the length of the candlestick’s real body.
- The shooting star pattern acts as a warning signal in a bullish market.
In continuation with the already existing upswing, the bulls pushed the price up and may even drive it to a new high. However, the bears stepped in and put up a big fight, forcing the price back down to close around the open price. The pattern must appear at the top of an upswing, and the upper wick must take up more than half of the length of the candlestick for it to be considered a shooting star. It must not be confused with the inverted hammer pattern, which is a similar pattern that forms at the bottom of a downswing.
Interpreting the shooting star candlestick pattern Shooting Star gives traders valuable insights into moments when optimism begins to fade, providing clues about a potential trend shift. When the market is in a highly volatile state, the stock prices keep fluctuating very quickly. Thus, during an uptrend, a single candlestick is not very reliable.
What does Green Shooting Star tell?
To assess how successful your trend reversal trading experience might be, use the ATAS Market Replay feature. This ATAS platform feature recreates real-time trading conditions using historical data. In practice, an oversimplified understanding of this pattern can lead to losses and frustration. Opening a short position immediately after spotting a Shooting Star without considering the context and additional confirmations is risky. The reason we point this out is that often a hammer candle will precede a trend reversal in the same way that a shooting star will.
Fibonacci shows retracement levels where the price will tend to revert frequently. Another popular way of trading the Shooting Star candlestick is using the Fibonacci retracement tool. The idea here is to trade pullbacks to the moving average when the price is on a downtrend. It’s simple, the Shooting Star pattern is traded when the low of the candle is broken. When trading the Shooting Star, we want to see the price first going up, making a bullish move. The existence or not of a wick (shadow) at the bottom doesn’t matter too.