Shooting Star Candlestick Pattern

One of the most powerful candlesticks that you can trade is what is known as a shooting star. The shooting star will often form at the end of an uptrend, signaling that the trend may be changing soon. Essentially, the shooting star shows that the market has run out of momentum to the upside. What happens is that the market initially goes much higher, but the sellers step in and push prices lower. This ultimately forms a candle that has a long way to the upside, but a very small or neutral body. Below you will see an example of this candle stick, and you can clearly see that as the market went higher and then could not hang onto the gains.

shooting star

shooting star

This shows that there was a serious attempt to rally the market, but at the end of the session, we ended up with a small body, and more importantly couldn’t hang onto the gains. While this particular example has a green body, even a red or neutral candle would tell us the same thing: that the buyers have exhausted themselves, and then gave up.

If we break down below the bottom of the shooting star, that shows that the market not only ran out of upward momentum, but it looks as if the market will go to much lower areas, as the buyers have completely been routed at that point. You have to look at this candle as exhaustion, and in a sense, the buyers “giving up”, and now having to close their long positions by selling, which of course continues even more downward pressure on this market. The shooting star is one of the most powerful candles if it is seen at the end of a very overbought condition. Combining the two will quite often lead to trend changes.

On the chart below, you can see how the buyers ran out of steam during the day, and as a result the sellers gained the upper hand as the buyers are starting to lose money. The buyers have to sell the market in order to flatten positions that are now costing them. By doing so, the pressure to the downside increases and then sends the market even lower, continuing the cycle lower.


Shooting star begins sell off.


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