Shooting Star Candlestick Pattern Physical Description:

The Shooting Star Candlestick is a one candle pattern and is a potential Top Reversal Indicator that can only occur during a previously established uptrend in price. This pattern gets it’s name due to the long upper shadow, resembling the tail of a shooting star, above the relatively small real body.

Shooting Star Candlestick Pattern Chart Criteria:

• Appears in the context of an uptrend

• Upper shadow (wick) must be 2-3 times the length of the real body

• Candlestick can be either black or white

Shooting Star Candlestick Pattern Market Psychology:

This is a single candle formation that forms on a chart only during an uptrend. During the preceding uptrend buyers have been in control and have been moving price higher throughout the trend. With the formation of the Shooting Star, which is a type of spinning top candlestick, the small real body indicates that the opening and closing prices of the trading session are very close together and that there is no real strength by either the buyers or the sellers.

However, the presence of the long upper shadow indicates that at some point during the trading day buyers did move price higher but were met with supply in the form of sellers that moved price back off of the highs of the day. This long upper shadow signals selling pressure and may indicate that the security is in an “overbought” condition.

As with most Candlestick Patterns the presence of a Shooting Star Candlestick does not by itself indicate a price reversal. Look for a close below the low of the Shooting Star on the next trading day for confirmation of a reversal.

Shooting Star Candlestick Pattern Trading Implications:

This candlestick pattern is a stronger bearish indicator than the Hanging Man for predicting a reversal. Traders and investors should use the formation of a Shooting Star Candlestick Pattern to draw attention to the fact that the previous trend may be in danger of reversing. Combined with other forms of Technical Analysis, this pattern should be used to help guide buying and selling decisions.

Factors that Increase The Strength Of a Shooting Star Candlestick Pattern:

In reference to a Shooting Star Candlestick Pattern, the longer the upper shadow in relation to the real body equates to stronger selling pressure. Significant resistance levels at or above this bearish candlestick increase the probability of a reversal. Look for other signs of a weakening trend from other technical analysis indicators to increase the reliability of this particular candle pattern.