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
