what is Shooting Star Candlestick Pattern?

Candlestick charts are charts that combine data from multiple time periods into one price bar. They can be used by traders to gauge future price movements. A shooting star is a bearish symbol that appears in the candlestick after an uptrend. This indicates that the price could fall, and it only appears after an advance.

When a candlestick's pattern appears during a price rise, it is considered a shooting star. The distance between the intraday high and the opening price must not exceed twice the size of the shooting stars' body. The shadow should not be below the actual body.

How do you interpret a shooting star?

The appearance of a shooting star on the technical charts indicates that the security's price is at a peak and that a reversal may be imminent. The best shooting star candle forms when there are three or more rising candles that have higher highs. It is possible to occur during a period with many bearish candles and over all rising prices.

A shooting star appears after the advance and continues to move higher throughout the session. This is a sign of the buying pressure that was previously experienced. The session progresses and the seller intervenes, causing the price to drop back to the open level, thus erasing any gains. The long shadow at the top represents the buyers who bought during the session, but are now in a losing situation as the price drops back to open.

Traders should be aware that the confirmation candle for the shooting star candle is the one that forms after it.

The highest candle should remain below the shooting start of the shooting stars, then it should move down to the end.Ideal formations are those in which the candle after the shooting star gapes, or opens close to the previous close and then ebbs less with heavy volumes.

The price reverse is confirmed by a down day after a shooting star appearance. This means that prices may continue to fall and traders might look to sell. Even if the price of a shooting star rises, it may be used as resistance.

The Inverted Hammer and the Shooting Star: What's the Difference?

Both the inverted hammer (and the shooting star) look similar. Both have long shadows. The two patterns share other similarities, such as small real bodies at the bottom of the candle and almost no lower Shadow.

The difference is that the inverted hammer happens after a fall in price, while the shooting star occurs following a rise in price.

Limitations for the Shooting Star

Prices tend to move very frequently. During an uptrend, one candle isn't very important. A confirmation is needed if bears are in charge of a portion of a period, such as in a shooting stars.

The trend has been that even after a short decline, prices continue to rise in line with the long-term uptrend. Stop loss candlesticks can be used to reduce risk.

A candlestick pattern can be considered more important if it occurs at a level that is significant by technical analysis.

Benefits

Because of its simplicity, the shooting star pattern can be considered a useful tool. It is easy to spot this pattern. The appearance of a candle is not enough. The shooting star confirms that the candle appears close to resistance.

Conclusion

A shooting star candlestick can be described as a bearish formation. It is formed when the price rises but is then pushed back down by bears to the opening price. The next candle after the shooting start is what traders are most concerned about. A decline in the price during the next period could trigger a sell-call, while a rise after the shooting stars may indicate that the formation was a false signal.

Also, the charts are indicative and may not always reflect a price movement.