The Shooting Star is a candlestick chart pattern which signals a potential reversal in an uptrending market. In this article we will show you how to identify it in the right market position with real chart examples.
The Shooting Star Candle Pattern is a one candle pattern which signals a reversal in the market. The Pattern is Bearish and should be identified as a signal when occurring in an up-trending market.
Shooting Star Candle Pattern Criteria:
- The shooting star has a small real body at the lower end of its range with a long upper shadow.
- It should have a very short or no lower shadow.
- The distance between the high and the close should be at least 2x the size of the real body.
- The colour of the real body is not important. The shooting star pictorially tells us that the market opened near its low, then strongly rallied and finally backed off to close near the opening, so session’s rally could not be sustained.
- An ideal shooting star has a real body which gaps away from the prior real body. Nonetheless, a gap is not always necessary.
- This pattern is not a major reversal signal and works best with further confirmation.
- A continuation of the uptrend would invalidate the signal.
- It can be used as a way to visually identify an area of resistance.
Quick Reference Guide – Candlestick Basics. If you need a reminder of what candlesticks are have a look at our free PDF – Candlesticks Explained.
The criteria and examples above are just the technical definitions of this pattern. However patterns are only useful with context and with real chart examples.
No pattern will ever exactly match the criteria and in order to be a useful signal must occur in the correct place in a trend. Let’s start by looking at the the classification table for this pattern.
Shooting Star Candle Pattern Classification Table
|Number of Candles In Pattern||1|
|Market Conditions: Range, Down-trend, Up-trend||Up-trend, Ranging|
|Position: Top, Bottom, Range||Top|
What Price Action Does The Shooting Star Pattern Represent?
All candlestick patterns are formed by price action. But the popular ones represent price action that may have significance in signalling the direction of the market.
The Shooting Star Pattern forms when a market starts with the bulls in control and pushes significantly higher than the open, only for the bears to take control and push the price back down to near the open price.
The pattern is more significant when preceded by several strong bullish candles of higher highs and if the Shooting Start itself gaps up on open. The formation of the Shooting Star in this circumstance can more strongly indicate a loss of momentum in the uptrend and a potential reversal of price action.
This is especially true when the pattern occurs in line with key support and resistance areas. Whenever a pattern happens in key support and resistance areas it makes this pattern more important and more likely to be valid – this is known as confirmation.
The ideal confirmation following a Shooting Star would be for the following candle to be bearish and close below the close of the Shooting Star. If that candle also gapped down on open and had high selling volume this would be even better confirmation.
Shooting Star Pattern Example With Confirmation
In the example below of the FTSE100, the market was up-trending and then the Shooting Star Candle Pattern formed at the top of the trend after several strong bullish candles (one of which gapped up).
This pattern coincided with a key area of resistance as it happened on a strong round level price. This confirmation can help the trader to feel more confident in the signal and the potential for a good trade.
In What Market Conditions Does The Shooting Star Pattern Become A Signal?
The Shooting Star Candle Pattern can be seen as a potential signal when it occurs in an up-trending market and preferably with further confirmation.
Although a weaker signal, it can be used in a ranging market if it occurs at the top of the trading range (also followed by confirmation). Let’s look at a couple of real chart examples.
Shooting Star Candle Pattern In A Ranging Market
A ranging market is one where the price action moves up and down between two sets of support and resistance. This is also known as a sideways, balancing or horizontal market. In essence the price action is struggling to break out of the range decisively either on the upside or downside.
As you can see in this example of the FTSE100 the market was ranging and a Shooting Star Candle Pattern occurred at the top of the range, followed by a bearish candle which closed below the close of the Shooting Star.
This signalled the top of that leg up. The market reversed and even broke the top of the range and went higher.
Shooting Star Candle Pattern In An Up-Trending Market
An up-trending market is one where the price action generally moves down over time and is characterized by higher lows and higher highs.
As you can see in this FTSE100 example, the market was up-trending and then the Shooting Star Candle Pattern occurred at the top of the trend, followed by confirmation (bearish candle). The market reversed and went lower.
Candle Pattern MT4 Indicator Downloads
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Important Information About Candlestick Patterns
Interpretation Of Candle Patterns:
It is important to note that these patterns were originally identified on the daily timeframes of index charts, which is still where they are the most useful. However, this does not mean that they cannot be used for other markets or time frames.
No signal is perfect and should never be used as such. Any patterns that you identify only signals a potential move based on the fact that history repeats itself and forms regular patterns in similar situations.
But past performance is no guarantee of future results! So always treat these patterns with care and think of these guidelines when using them.
Best practice guide for trading of candle patterns:
- No pattern is ever perfect. Be aware that patterns will form slightly differently each time and in different markets.
- Use them as consistently as possible. Even though you will never find patterns exactly the same, you should always implement a consistent ruleset when identifying and using patterns.
- It is never a guarantee, only an indication.
- Make sure you are using it in the right context. For example if it is a continuation pattern then don’t use it to trade reversals!
- Use multiple signals (confirmations) to have more confidence in your trading.
Inverted Hammer Candle Pattern
The Shooting Star Pattern looks very similar to the Inverted Hammer Pattern. However, these are different patterns.
The Inverted Hammer is a bullish reversal pattern so happens at the opposite part of a trend. Generally, the real body of a shooting star is also smaller in comparison to the upper shadow than you would look for in an Inverted Hammer. To read more about the Inverted Hammer Candle Pattern read our article here.
Morning Star Candle Pattern
Evening Star Candle Pattern
Morning Doji Star Candle Pattern
Evening Doji Star Candle Pattern
More About Candlestick Patterns
If you are interested in reading more about candlestick patterns you can find our articles on this topic here: https://www.nothardtrading.com/category/candle-patterns/ or choose a pattern below to read more.