This candlestick guide focuses on how to find and interpret the shooting star candlestick pattern. We also distinguish between the shooting star and inverted hammer candlestick pattern, sometimes referred to as an inverted shooting star.
Read on to see example charts with a detailed explanation.
What Is The Shooting Star Candlestick?
The Shooting Star candlestick formation is viewed as a bearish reversal candlestick pattern that typically occurs at the top of uptrends.
The Shooting formation is created when the open, low, and close are roughly the same price.
Also, there is a long upper shadow, generally defined as at least twice the length of the real body. You can learn about ‘real body’ in our Candlesticks Basics Guide.
When the low and the close are the same, a bearish Shooting Star candlestick is formed.
What Makes A Shooting Star More Bearish?
The bearish shooting star is considered a stronger formation because the bears were able to reject the bulls completely plus the bears were able to push prices even more by closing below the opening price.
The Shooting Star formation is considered less bearish, but nevertheless bearish when the open and low are roughly the same.
The bears were able to counteract the bulls, but were not able to bring the price back to the price at the open.
How To Spot Resistance With Shooting Star Patterns
The long upper shadow of the Shooting Star implies that the market tested to find where resistance and supply was located.
When the market found the area of resistance, the highs of the day, bears began to push prices lower, ending the day near the opening price.
Thus, the bullish advance upward was rejected by the bears.
How to Interpret Shooting Star Candlestick Patterns
The chart below of Cisco Systems (CSCO) illustrates a Shooting Star reversal pattern after an uptrend:
In the CSCO chart above, the market began the day testing to find where supply would enter the market. CSCO’s stock price eventually found resistance at the high of the day.
In fact, there was so much resistance and subsequent selling pressure, that prices were able to close the day significantly lower than the open, a very bearish sign.
A Resistance And Exit Strategy Indicator
The Shooting Star is a candlestick pattern to help traders visually see where resistance and supply is located.
After an uptrend, the Shooting Star pattern can signal to traders that the uptrend might be over and that long positions could potentially be reduced or completely exited.
However, other indicators should be used in conjunction with the Shooting Star candlestick pattern to determine potential sell signals.
For example, waiting a day to see if prices continued falling or other chart indications such as a break of an upward trendline.
Using The Shooting Star To Spot Sell Signals
For aggressive traders, the Shooting Star pattern illustrated below could potentially be used as a sell signal.
The red portion of the candle (the difference between the open and close) was so large with CSCO, that it could be considered the same as a bearish candle occurring on the next day.
However, caution would have to be used because the close of the Shooting Star rested right at the uptrend support line for Cisco Systems. Generally speaking though, a trader would wait for a confirmation candle before entering.
Is There A Bullish Shooting Star Pattern?
The bullish version of the Shooting Star formation is the Inverted Hammer formation that occurs at bottoms.
Another similar candlestick pattern in look and interpretation to the Shooting Star pattern is the Gravestone Doji.
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When do I use a shooting star candlestick?
The shooting star candle stick pattern is a beneficial technical analysis tool to notice a bearish divergence in the market. The shooting star indicator may be useful for traders gone short on a market looking for an exit, or traders looking for an entry point to go long.
How do I identify shooting star candlestick?
You can recognize the shooting star candlestick pattern on the chart by looking at the upper shadow of the two candlesticks you’re analyzing, and how near the open, low, and closing prices are for the chosen time period. If the open, low, and closing prices are almost the same, you can see a shooting star formation that, often interpreted by traders as a sign for a bearish move.
What is a shooting star candlestick in forex?
In forex, the shooting star pattern shows like in any other chart. The candlestick for your chosen forex currency pair would open, close, and find a low at similar price points. In this case, the shooting star could be interpreted as the closer the price points, the tighter the shooting star, and the more likely that the currency pair you’re speculating on will fall.
Please note, this is an example – not a recommendation.
What does an inverted shooting star candlestick show?
The inverted shooting star is a bullish analysis tool, looking to notice market divergence from a previously bearish trend to a bullish rally. An inverted shooting star pattern is more commonly known as an inverted hammer candlestick. It can be recognized from a long upper shadow and tight open, close, and low prices — just like the shooting star. The difference is that the inverted hammer will have a bear run prior to the candle you’re looking for.
Learn more about technical analysis charting concepts and strategies including Momentum, Volatility, Time Series Forecast, Point & Figure, Open Interest, Standard Error Bands, Market Thrust, and Average Directional Movement .
For other candlestick technical analysis tools, see our guides on:
- Candlestick Basics
- Doji Candlestick Pattern
- Inverted Hammer Analysis
- Morning Star Patterns
- Harami Candlesticks