What is a shooting star
A shooting star candlestick or pinbar reversal is a bearish candlestick pattern that appears during an uptrend in a chart. Shooting stars tend to have long top wicks and few bottom wicks, and the candle body is usually small. A shooting star usually occurs when the price opens, rises significantly during the day, but then reverses and closes near or below the open price. The larger the top wick relative to the body of the candle, the more bearish it is. This is because it creates new overhead resistance and indicates rejection by buyers at higher prices.
- A shooting star is a bearish signal and may indicate an increasing likelihood of the end of an uptrend and the start of a downtrend.
- It is bearish as it signals the refusal of price increases and the beginning of selling pressure.
- If the next candle after the shooting star has low highs and lows, the uptrend is likely to end.
- A bearish signal will be invalidated if the price returns above the shooting star day high.
- Shooting star candlesticks are great for joining other signals such as overbought readings, key moving averages, and resistance zones to put patterns in context across the chart.
What can a shooting star tell you?
The shooting star candlestick pattern is telling traders and investors that price action has likely reached the top of the chart, at least in the short term. This indicated that the odds had changed and buyers were exhausted by the highs, and sellers were trying to overwhelm them to bring price action back to where it started or below. Buyers and sellers are always equal in each transaction, but price action reveals actual supply and demand indicators at various levels. A shooting star indicates overwhelming supply at higher prices and a lack of demand by buyers who continue to push the charts up. I’m here.
Why are shooting stars bearish?
- The inability of the chart to hold new highs.
- Reversal back to candle opening.
- big upper core.
- Candlesticks are usually black or red, indicating that the closing price is lower than the opening price.
Example of how to use shooting stars
A shooting star candlestick pattern can be used as a short selling signal on a bearish chart. Confirm that the chart may have started reversing because the price didn’t go up and went down. A short sell is likely to succeed on the next bearish candle entry after the shooting star candle, confirming that the price follows the lower price. The target is set on the chart or the previous support or resistance level of 50 RSI. A trailing stop can be moved to each previous candle high as an end candle stop to secure profits if there is a significant reversal upwards.
How to find resistance in a shooting star pattern
Shooting star candlestick patterns are best when combined with other signals such as overbought readings, leading moving averages, and resistance zones. It is most meaningful and accurate when it occurs in overbought areas such as the 70 RSI and his third deviation from the 20-day moving average. Shooting stars forming at overhead Fibonacci levels or leading moving averages can also indicate bearish confluences. A shooting star occurring at a higher price when the RSI is at a lower level than its previous high could indicate a bearish divergence between the price and the indicator.
Use shooting stars to spot sell signals
A shooting star can signal with great accuracy that it is time to take profit on a long position during a strong uptrend. If the chart makes a big reversal after a long uptrend, the risk/reward ratio is no longer favorable. A shooting star can be both a short signal for a new position or an exit signal for a current long position.
shooting star limit
Shooting star candlestick patterns are unpredictable. It just shows that one thing is more likely than another in the future based on the current price action on the chart. You can create an edge by showing objective bearish price action, not just a subjective opinion of what happens next. is not. Stop loss should be used on all trades to limit risk exposure.
Difference between Shooting Star and Inverted Hammer
A shooting star looks like an upside-down hammer, but it is bearish in an uptrend. Shooting star candles have a lower closing price than opening price and are generally red or black candles.
If an inverted hammer occurs near the chart lows, it could signal a bullish reversal. A bullish inverted hammer indicates that buyers have raised price action after rejecting new lows. An inverted hammer indicates that there are dip buyers in the downtrend and they have held the price to a close higher than the candle’s low. This is a hidden demand signal within the downtrend. The long wicks of inverted candlesticks often stick within the range of the previous candlestick on the chart. If the next candle on the chart after the inverted candle is bullish, it confirms a bullish signal that at least a short-term price low may be in, and the higher price ahead is new. It becomes possible.
important point
A shooting star candle is one of the strongest bearish candle signals in technical analysis and is likely the time to take profit on a long position and a good time to short on the chart where it occurs. It shows that it can even be the time.