The “Shooting Star” candle pattern is a bearish pair of the “Hammer” model, which heralds a reversal of the market and the beginning of a downward trend. Appearance of this pattern in the graphical analysis of Japanese candlesticks is a signal for selling (opening a short deal). Outwardly, “Shooting Star” is a mirrored “Hammer”. It represents a single candlestick formed at the top of an uptrend. The color of this forex candle can be any, as well as the size of its body. An important feature – “Shooting Star” should be preceded by a price gap. That is, there should be an empty gap between the “star” and the previous candlestick. You can also study the shooting star candle finmaxfx.
As to shadows, the following ratios should be observed for them. The upper shadow (“star’s tail”) should be at least three times longer than the candlestick body of the pattern. The bottom shadow is no more than 10 % of distance from a minimum up to a maximum of model, and even better, if it will not be absolutely. We think anybody who has seen the pattern of Japanese candlesticks “Shooting Star” will agree that the appearance of the model is quite justified by its name. The body of the candle at the top of the trend (especially if it is small and white) is like a star in the sky, and the long upper shadow – the tail of the star, which was so fond of drawing on medieval prints. And why the falling star? Probably because with this model of Japanese candlesticks the market starts to fall down.
But enough romance, let’s talk about psychology. The pattern formation is preceded by bull moods. So, after the opening of his candle, the price rises, forming a long upper shadow, but the assault clearly failed, the price falls again! It makes the bulls think, and bears cheer up. Closing the session slightly above the opening price or under it finally approves the “bearish period”.
Features of Shooting Stars
Now let us move on to the features of the “Shooting Star” and the factors that amplify / weaken its trading signal.
- It is important, but not really. The “Shooting Star” pattern is not one of the strong and important reversal signals of Japanese candlesticks. As well as the “Hammer”, the “overheated” market becomes the most important one. That is, when there is a long bullish trend and the oscillator shows that the market is overbought (Figure 6).
- Star of Darkness. The pattern candlestick color can be any color, but the model power depends on it. Therefore, keep in mind that the black “Shooting Star” is stronger than white! The small size of the candle body also enhances the signal. The smaller it is, the better, up to the absence of its body as such.
- The “Shooting Star” can also be found on the intraday Forex charts. What is typical is that the closing price of the candle preceding the pattern and the opening price of the “star” itself will be approximately equal.
- When the stars talk about power. For candlestick formation “Shooting Star” confirmation is obligatory. It can be the appearance of a long bearish candlestick, a gap of exhaustion or the transition of the “Shooting Star” to another bearish pattern. For example, a good signal would be a strong pattern of “Evening Star”.
- And when the stars speak of weakness. It is also worth paying attention to those “alarm bells” that can warn about the model’s weakness. They will be the penetration of an important local resistance level by the body of the “Shooting Star”, or the presence of a strong bullish candle before the pattern.
The model of Japanese candlesticks “Shooting Star”, as well as its pair “Hammer”, are not very effective trading signals. On the other hand, you should in any case study as many Tools for the FX Market as possible in order to get the best possible results from trading.