Shooting Star
Tue, Apr 15A Shooting Star is a single candlestick pattern that appears during an uptrend. This candlestick can indicate a peak, although it is often retested.
The formation of a Shooting Star occurs when the price opens at a higher level, trades significantly higher, and then closes close to its opening price. This bearish reversal candle resembles the Inverted Hammer, but it signals a bearish trend.
The Shooting Star pattern consists of a single candle characterized by a short body, minimal or no lower shadow, and a very long upper shadow. To identify a Shooting Star candlestick, look for the following criteria:
- A Shooting Star will not appear at the end of a downtrend.
- The candlestick must follow an uptrend, as it is logical for the signal to occur at a high point after a significant price increase.
- The candlestick should have a short body.
- The lower shadow should be absent or very small.
- The upper shadow, which indicates the extent of price movement, must be tall, at least twice the length of the body.
The long upper shadow gives the candlestick its name, as it resembles a shooting star when combined with the small body and its position after an uptrend.
The Shooting Star serves as a bearish reversal signal, suggesting that the price has peaked in its current uptrend and is likely to decline soon. In the preceding candles, the bulls have dominated, driving prices higher within an established uptrend.
However, during the current session, while the bulls initially pushed prices up after the market opened, the bears intervened. The price was pushed back down, closing near its opening level, indicating that the bulls have lost control.
To better understand the formation of the candlestick, consider the following characteristics:
- If there is a gap between the body of the previous candle and the current one, the likelihood of a strong reversal increases.
- The color of the body is not crucial, but a black body suggests a bearish bias.
- The longer the upper shadow, the greater the potential for a reversal.
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