Tag: Shooting star candlestick

What is Shooting Star Candlestick Patterns?
If you are into stock markets and doing trading on a regular basis, then shooting star candlestick pattern is something you are familiar with. For those who are planning to get into the stock market business or thinking of doing option trading, day trading, swing trading or other stuff, shooting star candle stick pattern is something new to them. Therefore, it is necessary for them to learn the meaning of it so that they can understand the trends and technicalities of share market trading. It will help them to gain momentum of profit and avert the possibilities of loss to a great extent. So, if you are interested in stock trading and want to grow in this business, then let’s get into the in-depth analysis of what is shooting star candlestick patterns.

Understanding Shooting Star Candlestick Patterns?

A shooting star candlestick pattern appears at the culmination of an uptrend. The shooting star is symbolized as a bearish candlestick with a lengthy upper shadow. The shooting star is a hammer candle held upside down. The wick becomes higher rather than lower, and the open, low, and close are all roughly the same level. Furthermore, there is a long top shadow, which is usually considered to be at least two times as long as the real body.

What does Shooting Star Describes to you?

Shooting stars indicates possible turn to the negative side. If it forms after two or three rising candles with higher highs, it is most powerful. During the day, a shooting star emerges and then climbs quickly. This demonstrates the same purchasing pressure as observed in the previous few times.

In reality, the shooting star candle is confirmed by the candle that forms following it. The sellers drive the price down toward the open at the closing bell of the trading session. This shows how the sellers have gained power and their buyers have lost it. Following the shooting star gaps, the candle drops while playing loudly. This candle suggests that the price will keep falling and supports the price reversal.

What is Shooting Star Candlestick Formation?

The shooting star candle stick formation refers to a technical pattern for explaining it. Generally, it happens at the end of the uptrend and manifest a possible reversal in price direction. This is how a shooting start formation is being identified.
- Uptrend – the shooting star uptrend happens after a duration of upward price trend.
- Long upper shadow – The candle stick pattern comprises a small real body (showing the difference between open and close prices) nearby the bottom of the trading range, showing minor movement between the open and the close prices. Although, it holds long upper shadow or wick, which characterize the price going to the higher levels at the time of trading session.
- Short lower shadow – the candle stick pattern might also have short lower shadow or wick, with lower shadow missing completely. It shows that there was little or no buying constraint at all during the trading time.
- Closing price near low – even after opening higher, the closing price is near or sometimes below the opening price. It indicates that sellers have gained control towards the end of the trading session.
Since graphically, the candlestick pattern looks like a star with a small body and upper long shadow, thus it is called as shooting star.

Here is a chronological breakdown of the shooting star candle stick components:
- Open – the opening price at the time the market has opened for trading.
- High – the peak price it reaches at the time of trading period.
- Low – when the price reaches the lowest level during the trading period.
- Close – it is the price when the market gets closed during the trading period.
When examining the shooting star formation, traders usually seek some reassuring signs like a bearish follow-through in the succeeding candles, a close just underneath the shooting star’s low, and other technical signs to authenticate the possible reversal before they take the trading decision.

How to look for Shooting star with Resistance Pattern

The shooting star’s long upper shadow suggests that the market conducted tests to determine where resistance and supply were positioned. When the market encountered resistance at the day’s highs, bears started pushing prices lower, with the day closing at the starting price.

The shooting star candlestick pattern allows traders to visually understand where resistance and supply are situated. Following an uptrend, the shooting star candlestick pattern can indicate to traders that the uptrend may be gone and that long holdings should be trimmed or entirely withdrawn.

What is the Difference Between Inverted Hammer and Shooting Star?

The shooting star and the inverted hammer seemed to be identical. Both have extended higher shadows and little actual bodies close to the candle’s base. There may be a shadow or no shade in the lower area.

A shooting star appears after a price rise and indicates a potential lower turning point, whereas an inverted hammer appears after a price decrease and indicates a potential higher turning point.

Advantages of Using Shooting Star Candlestick Pattern

The advantages of a shooting star candlestick pattern comprise of:
- One of the primary advantages of the shooting star candlestick pattern in technical analysis lies in its simple formation.
- It is a good indicator of a bearish reversal, especially if it occurs around the resistance level. The shooting star candlestick pattern should never be seen in isolation.
- It is important to verify the signals with technical indicators. For example, if a shooting star at the top of an uptrend indicates a potential reversal, the trader can test the negative bias.
- This indicator helps predict the degree to which the market will stray from the current trend.
What are the Disadvantages of Shooting Star Candlestick

There are certain disadvantages of investing in this pattern:
- Due to the market’s instability, one candlestick may not be enough to signal an impending negative win; more confirmation is needed.
- After brief declines, the market may resume its upward trend, as it has in the past. This makes it essential that you use stop losses while trading with candlesticks.
- Shooting-star candlesticks aren’t trustworthy signals of market direction. When combined with other types of technical analysis, they have a better chance of being accurate analysts.
FAQs on Shooting Star Candlestick Patterns

How is a shooting star pattern formed in a stock chart?

A stock chart displays a shooting star pattern when the price opens higher than it did at the close of the previous trade, rallies during the trading session, and then reverses and closes close to or below the opening price. Near the bottom end of the range, it has a little true body and a large upper shadow.

Is shooting star a bullish candle?

No, shooting star candle pattern is only bearish in nature however it can also show an upward trend. Though, the possibility of false signals is quite high.

Is a Shooting Star a Doji?

A shooting star isn’t a doji. A shooting star is a bearish trend reversal indicator. A doji, on the other hand, is a signal of indecision in which the opening and closing prices are very near to each other as a result of the bulls and bears’ struggle for price control.

How reliable is a shooting star pattern in predicting market trends?

A number of elements, including current market circumstances, volume, and confirmation from other technical indicators influences a shooting star pattern’s potential to predict market trends. It is regarded as more dependable when it appears after a long uptrend and at high resistance levels.

What does an inverted shooting star candlestick show?

The inverted shooting star pattern is also known as the inverted hammer candlestick. It is distinguished by a lengthy upper shadow and tight open, close, and low pricing, much like a shooting star.

Is a shooting star bullish or bearish?

The shooting star candlestick pattern is bearish and has a small real body close to the day’s low, a long upper shadow, and little or no lower shadow.

Read More: How to Identify Swing Highs and Swing Lows
8 April, 2024
Study of Candlestick Chart

“The Beginning Is Most Important.”

            Candlestick is the most popular & most usable chart in trading. Even most of the successful traders also advise to use this charts for trade. Candlestick chart is invented by MUNEHISA HOMMA.

This charts were developed in the 18th century by Munehisa Homma, a Japanese rice trader. He is considered as the father of the candlestick chart. He is one of the most successful trader in History. The Candlestick trading Bible is one of the most powerful trading systems in history. This trading system is based on Japanese candlestick patterns in combination with technical analysis. Learning Japanese candlestick is like learning a new language. We have to understand the psychology behind the candle formation, understand the candle pattern & most important thing is to understand the trends.

CANDLESTICKS BODY

     Candlesticks have different colors and body size.

The most trading platforms were using White & Black color refers to Bullish & Bearish candlestick charts. But, at present it has been upgraded with colorful charts where white candle is denoted by Green Color & Black candle is denoted by Red color. Filled part of the candlestick is called the Real Body. Thin lines poking above & below the body are called Shadows/Tail.

              If the candle closes above the open price, it indicates the market forms a bullish candlestick. Bullish candles always display as Green color. And if the candle closes below the open price, it indicates the market forms a bearish candlestick. Bearish candles always display as Red color.

But the color doesn’t matters, you can use whatever color you want.

Long v/s Short

Long bodies of candles shows strong buying & selling pressure. Bullish long candle indicates that buyers are more stronger than sellers and they are taking control of the market during this period of time. Conversely, a bearish long candle indicates that sellers are stronger than buyers & they are taking control of the market during this period of time.

Short & small bodies indicate a little buying & selling activity.Upper & lower shadows give us important information about the trading session. Candlestick with long shadows show that trading action occurred well past the open & close. Japanese candlesticks with short shadows indicates that most of the trading actions are confined near the open & close.

         If a candlestick has a longer upper shadow, and short lower shadow, this means that buyers flexed their muscles and bid price higher. But for one reason or another, sellers comes in and drove the price back down to end the session back near its open price.

         If a Japanese candlestick has a long lower shadow and short upper shadow, this means that sellers flashed their washboard abs and forced the price lower. But for one reason or another a buyer comes in and drove prices back up to end the session back near its open price.

CANDLESTICK PATTERNS

Candlestick patterns are one of the most powerful trading concepts, they are simple, easy to identify, & very profitable setups. Candlestick patterns are the language of the market. Here are some of the candlestick patterns that will help us in the market:

1. THE DOJI CANDLESTICK PATTERN

Doji is the most important Japanese Candlestick Pattern. When this candlestick forms, it tells us that the market Opens & Close at the same price which means that there is equality & indecision between buyers & sellers there is no one in control of the market. If the closing & opening prices are same, that means candle is giving us a single, that market is not able to decide which direction to take. The above chart shows how the market has changed the direction after the formation of the Doji candle pattern. If Doji forms in uptrend it gives a signal, that the buyers are failing to keep the price up & sellers are pushing the price back to the opening price. When Doji form in downtrend that indicates the market is ready to go up side & it gives a reversal signal.

2.THE DRAGONFLY DOJI PATTERN

Dragonfly Doji is a Bullish candlestick Pattern. Dragonfly Doji is formed when the open, high & close are the same & it has no upper shadow. An important identification of dragonfly doji is its long lower shadow. Indecision & trend reversal are indicators of the dragonfly Doji. The long lower tail suggests that the force of supply & demand are nearing a balance & that the direction of the trend may be nearing a major turning point.

The above chart shows how the downtrend market changes the direction of the market toward uptrend. The formation of dragonfly Doji with long lower tails shows us that there is a high buying pressure in the area. The war between Bull & Bear, attempted by the bear towards pushing price down, but here buyers are stronger than sellers.

3.THE GRAVESTONE DOJI

The gravestone doji is the Bearish version of the dragonfly doji. It is a bearish reversal candlestick which mostly occurs at the top of uptrends. The formation of the long upper tail is an indication that the market is testing a powerful supply or resistance area.

The image above is a perfect gravestone Doji. This pattern indicates that while buyers were able to push prices well above the open. Later in the day, sellers overwhelmed the market pushing the price back down. This is interpreted as a sign that bulls are losing their momentum and the market is ready for a reversal.

4.THE BEARISH ENGULFING BAR CANDLESTICK PATTERN

The bearish engulfing is one of the most important candlestick patterns. Engulfing bar is formed when it fully engulfs the previous candle.

The first candlestick shows that the bulls were in charge of the market, while the second shows that bearish pressure pushed the market price lower. The second period will open higher than the previous day but finish significantly lower.

The engulfing bar can engulf more than one previous candle, but to be considered an engulfing bar, at least one candle must be fully consumed. When this pattern occurs at the end of an Uptrend, this indicates that buyers are engulfed by sellers which signals a trend Reversal.

The pattern is also a sign for those in a long position to consider closing their trade.

5.THE BULLISH ENGULFING BAR PATTERN

A bullish engulfing pattern is the opposite of a bearish engulfing pattern. Many traders use this candlestick pattern to identify price reversals and continuations to support their trading strategies.

The bullish engulfing bar consists of two candlesticks, the first one is the small body, & the second is the engulfing candle. When a bullish engulfing candle forms at the end of downtrend the reversal is much more powerful as it represents a capitulation bottom. The color of the body is not important, what’s important is that the smaller one is totally engulfed by the second candlestick.

6.MORNING STAR CANDLESTICK

  The Morning Star Pattern is considered as a BULLISH REVERSAL PATTERN. A morning star candlestick pattern can successfully predict or explain trends in price movements in the case of equity, currency trading or financial derivatives. This pattern occurs at the bottom of Downtrend near a support level, it is interpreted as a powerful trend Reversal Signal. The first candlestick is bearish. The second candle is small & this can be Bullish Or bearish. Second one produces indecision in the market, second candle could be a DOJI or any other CANDLE. The Third candle is a bullish candlestick that gapped up on the open & closed above midpoint of the body of the first day, this candlestick holds a significant trend reversal signal.

7.THE EVENING STAR PATTERN

The Evening Star Pattern is the opposite of the Morning star pattern. The evening star pattern is considered as a Bearish Reversal Pattern. This pattern occurs at the top of an Uptrend. The First candle is a Bullish candle. The second candle is a small candlestick, it can be bullish or bearish or it can be a DOJI or any other Candles. The third candle is a large bearish candle. In general the evening star pattern is the bearish version of the morning star pattern. Third candlestick gaping lower than the previous candlestick indicating a confirmation of the reversal & the beginning of new trend down.

8.HAMMER (BIN BAR)

The hammer is a reversal candlestick pattern when it occurs at the bottom of a Downtrend. Long lower shadow that indicates a bullish rejection from buyers & their intention to push the market.

Understand the psychology behind the formation of patterns , here sellers forcefully push the price down but that time of period buyers are more powerful than sellers which result in trend reversal.

9.SHOOTING STAR (BEARISH PIN BAR)

Shooting star is the Bearish version of the hammer. This candle is characterized by a small body. And long upper shadow. Shadow should be twice the length of the real body. This pattern occurs in an uptrend. It indicates a bearish reversal pattern.

It is one of the most powerful signals.

10.HARAMI PATTERN ( INSIDE BAR)

   Harami pattern (Pregnant In Japanese) is considered as a Reversal & Continuation pattern, & it consists of two candlesticks. The first candle is the large candle, it is called the mother candle, followed by a smaller candle which is called the baby. Harami pattern to be valid, the second candle should close outside the previous one. This candlestick is considered as a Bearish Reversal Signal when it occurs at the top of an uptrend, and it is Bullish Signal when it occurs at the bottom of a Downtrend. Smaller body is totally covered by the previous mother candle. Don’t bother yourself with colors, the most important is that the smaller body closes inside of the first bigger.

11.TWEEZERS TOPS & BOTTOMS

   The tweezers top formation is considered as a Bearish Reversal Pattern seen at the top of an Uptrend. The tweezers bottom formation is interpreted as a Bullish Reversal Pattern seen at the bottom of a Downtrend. The first one is a bullish candlestick followed by a bearish candlestick. And the tweezer bottom formation consists of two candlesticks as well. The tweezer bottom happens during a Downtrend.

Note:

The candlestick pattern is more workable in higher time frame (weekly, daily & 4hr.) compare to lower time frame. When candlestick pattern is form in the chart, than wait for confirmation & follow up.

17 May, 2020