- Sentiment: Bearish
- No. of candles: 1
- Direction: Reversal
What Is The Shooting Star Japanese Candlestick Pattern?
The Shooting Star pattern is a bearish reversal pattern that typically forms after an uptrend or during a period of market consolidation.
The Japanese candlestick pattern consists of a single candle. This candle has a small body (either bullish or bearish) at the lower end of the price range, a long upper shadow (typically at least twice the length of the body), and a small or nonexistent lower shadow.
The pattern signifies that the market tested higher levels but faced selling pressure, with sellers pushing the price back down to close near the opening price.
What Is The Psychology Behind The Bearish Shooting Star Pattern?
The Shooting Star pattern reflects a potential shift in market sentiment from bullish to bearish.
During the period of the Shooting Star candle, buyers initially push the price higher, but sellers step in and drive the price back down, rejecting the higher price levels.
This pattern indicates a possible loss of momentum for the bulls and hints at a potential trend reversal, as sellers attempt to regain control.
Japanese Candlestick Charting Techniques, Second Edition
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To trade the Shooting Star pattern, wait for confirmation by a subsequent bearish candle or another technical indicator.
The sell trigger occurs when the price moves and closes below the low of the candle, confirming the pattern.
Place a stop loss order above the high of the candle to protect against potential false breakouts or reversals.
As the price moves in your favor, consider using trailing stops or other risk management techniques to lock in profits and minimize potential losses.
Additional Tips
While the Shooting Star pattern can be a reliable bearish reversal signal, it is essential to use it in conjunction with other technical indicators and chart patterns to confirm the trend change.
Additionally, be aware of the overall market context and consider factors such as support and resistance levels, as well as the strength of the prevailing trend.
Keep in mind that no single pattern can guarantee a trend reversal, and proper risk management is always necessary.
Continue to learn about Japanese candlesticks through books, such as Steve Nison’s “Japanese Candlestick Charting Techniques” and “Beyond Candlesticks.”