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How to Trade the Shooting Star Candlestick Pattern

How to Trade the Shooting Star Candlestick Pattern

A shooting star consists of a single candlestick with a long upper shadow and a short body, heralding a drop in price.

The shooting star candle is a pattern on the chart of Japanese candlesticks, which consists of one candle. This candle opens with a window upwards, has a short body and a long upper shadow. Shooting star is bearish pattern, i.e. it heralds the fall of the financial instrument price.

More information about Shooting Star

Recall that any “star” on the chart of Japanese candles differs in small body size and opening with a break upwards.

Since the Shooting Star consists of only one candle, it is easy to define it on the chart: you only need to check it for a few criteria. If all criteria coincide, it means that the figure is real and the probability of price falling will increase significantly.

Characteristics of the Shooting Star

First, it should be noted that before the formation of the figure there should be growth, at least short-term in a few candles. Then, if the candlestick meets all the above criteria, we refer it to the Shooting Star and draw the appropriate conclusions:

  • the opening of the candlestick happened with a break upwards.
  • the body of the candle is relatively short (it should visually look like a square)
  • candlelight is at least twice as long as the body.
  • the lower shade is either absent or less than half the body height
  • candle color does not matter

Market psychology during the figure

It is not difficult to see that the key factors of the figure are the gap and the large upper shadow. Such attributes of the candlesticks suggest that the market sentiment was positive at the beginning of the period.

The upside-down hammer and the Shooting Star

We can see that Shooting Star is very similar to the Upside-down hammer, but differs conceptually: while the Upside-down hammer is located at the end of the downtrend and foretells the price to rise, Shooting Star is located at the upside and foretells the price to fall.

Conclusion

Shadows of Japanese candlesticks, like the body, give analysts important information about the auction in this period.

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