Shooting Star Candlestick Pattern Beginner’s Guide

It’s crucial to assess the pattern within the broader market framework, considering factors such as volume, historical price levels, and market trends. Understanding and applying these nuances can be the difference between a good and a great trading decision. One of the advantages of the Shooting Star pattern is its ease of identification. Its distinct structure — a small real body with a long upper shadow — makes it stand out on a candlestick chart. This clarity is beneficial for traders, especially beginners, as it provides a straightforward signal without needing complex analysis. The shooting star is a singular candlestick pattern, while the evening star is a pattern that spans over three consecutive candlesticks.

1. The shooting star pattern can occur during periods when bulls appear to be in total control, with prices likely to continue edging higher.
2. We also distinguish between the shooting star and inverted hammer candlestick pattern, sometimes referred to as an inverted shooting star.
3. As seen in the chart, both inverted hammer candlestick patterns resulted in a heavy upward movement.
4. The pattern shows prices opened and went higher but closed lower at the end of the day resulting in a long wick and small body.
5. If prices continue to fall, it is seen as confirmation that the Shooting Star trading was a valid signal and that the trend may be reversing.
6. The emergence of a strong bearish candlestick that opens and closes below the shooting star candle affirms bears are in control of the market.

The Difference Between the Shooting Star and the Inverted Hammer

The H4 chart below shows that the price cannot break out the resistance and forms several bearish patterns. In addition, the MACD indicator also began to move into the negative zone. Then the hanging man, the evening star, and another shooting star are formed. The transition of the MACD into the negative zone and the impulsive breakout of the support level served as additional confirmation. A shooting star pattern with a small real body at the bottom of a price range and a long upper shadow that signals a likely peak on the chart.

Pattern failure happens when the expected bearish reversal doesn’t happen, and when the price continues upward, often because of a lack of confirmation, strong market sentiment, or weak volume. Before looking for a shooting star, ensure the stock is in an uptrend. This pattern is only significant as a potential reversal signal at the end of an upward shift. Use longer-term moving averages or trend lines to confirm the direction. The Shooting Star pattern results in a bearish reversal 59% of the time during a bull market, and 60% of the time during a bear market.

The Stick Sandwich Candlestick Pattern + Chart Examples

Additionally, there should be little to no shadow below the real body of the candlestick. The blue arrows on the image measure and apply three times the size of the shooting star candle pattern. If a stock is in a bullish uptrend and you identify a shooting star candle, then there is a solid chance that the trend will reverse. For this reason, traders use this candle to enter short trades on the assumption that the bullish move is running out of steam. For example, the pattern may be less effective in markets with low trading volumes or during periods of high volatility.

1. We wait to see if the next candle is going to confirm the authenticity of the shooting star reversal pattern.
2. Traders who are new to trading and beginners also find it easy to spot the shooting star candlestick pattern.
3. In the case of the shooting star, it signals a bearish reversal, suggesting that the upward momentum is losing strength and that the price may decline.
4. Let’s see how these indicators can complement the shooting star candlestick pattern.
5. Conversely, the cousin of the shooting star pattern – the inverted hammer – is a bullish reversal candlestick pattern.

Before executing a trade based on the shooting star pattern, it’s crucial to confirm the prevailing trend. Ensure that there is an active bullish trend before considering a short position triggered by the shooting star pattern. The Shooting Star is a bearish reversal pattern that looks identical to the inverted hammer but occurs when the price has been rising. To that end, we’ve put together a handful of reference guides for the best bullish and bearish candlestick patterns to help guide you along the way.

Shooting star candlesticks are straightforward patterns that even beginners can comprehend very easily. Investors and traders must ideally analyse the patterns that follow a shooting star for three days, to make careful and well-thought-out trading decisions. The pattern formed by a shooting star candlestick falling star candlestick during the price drop resembles the rapid movement of a shooting star when it comes crashing into the earth’s atmosphere before burning up. The shooting star pattern can be a valuable tool in a trader’s arsenal, offering a preview of potential market reversals.

Most Popular Chart Patterns

Users should seek independent advice and information before making financial decisions. 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.

This flexibility allows traders of all styles to utilize this pattern in their market analysis. Its appearance can prompt traders to adjust stop-loss orders to protect profits or limit potential losses. This proactive approach to risk management is crucial in the unpredictable world of trading. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74%-89% of retail investor accounts lose money when trading CFDs. You should consider whether you can afford to take the high risk of losing your money.

Stay ahead of the market!

This level is a buffer if the price temporarily moves against your position before resuming the downward trend. Essentially, the Doji reflects hesitation, while the Shooting Star shows a loss of momentum in an uptrend. For example, let’s say the stock opens at $100, rises to $110 during the trading session, but then closes at $102. Strike offers a free trial along with a subscription to help traders and investors make better decisions in the stock market. Successful trading is about managing probabilities and risk, not perfection.

The bullish version of the Shooting Star formation is the Inverted Hammer formation that occurs at bottoms. The Shooting formation is created when the open, low, and close are roughly the same price. Fibonacci shows retracement levels where the price will tend to revert frequently. 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.

Suddenly, a shooting star candlestick appears, which is marked with the green circle on the chart. We have a small candle body and a big upper candlewick, which confirms the shape of the pattern. The shooting star candle is a reversal pattern of an upwards price move. It is important to note that the Shooting Star candle should not be confused with other candlestick patterns that have a similar appearance, such as the Inverted Hammer or the Hanging Man. While these patterns have a long lower shadow and a small real body, the Shooting Star pattern has a long upper shadow and a small or non-existent lower shadow. Its long upper shadow shows a failed rally, while the small real body (red or black, depending on the chart type) indicates that sellers regained control by the close of the period.