Shooting Star Candlestick Pattern Definition
If there was a large rise in price in the middle of the day, but before the day ended it decreased to what it was at the beginning of the day and even less, a significant downward return occurred. The candlestick of this change (move) will be a Shooting Star in a daily time frame. A Shooting Star formation on the daily time frame is a very strong indication for probability of decreasing price in next days.
Example: The picture shows currency pair of EUR/USD in a 30 minute time frame. On May 08, 2014 the price significantly increased from 1.3910 to 1.3995, but after that, it rapidly decreased even more and at the end of the day to it was closed at 1.3839.
Also in this picture - for better understanding - the Shooting Star Candlestick in the daily time frame - in the result of this intraday change - is drawn.
Conditions of a Perfect Shooting Star:
- Body height must be short.
- The total height of the candle must be tall and more than the Daily ATR-264. The taller the candle is, the stronger the Shooting Star.
- The upper shadow’s length should be very tall. It is better to be over 75 percent of the Daily ATR-264.
- The lower shadow does not exist, or if it does, it is very small. It shouldn't be more than 25 percent of the Daily ATR-264.
- The Shooting Star that has bearish body is stronger than the one which has a bullish body.
For more information on this article, please read: “Professional Parameters to Determine the Strength of Hammer and Shooting Star.”
Perfect Shooting Star: The picture shows a standard Shooting Star candlestick.
As can be seen, the candle’s height is tall, but it has a very short body height. Also, the upper shadow is very long and the lower shadow is very short.
As regards the Close price of market is below its Open price, therefore the body of this Shooting Star is bearish, and the power is very high.
Shooting Star: The first sign of the beginning bearish wave.
Shooting Star shows that the war between buyers and sellers, at the beginning of the day buyers could create significant increment in price, with their high investments. But when the price had come to the highest extent of it, many of sellers have entered with more investments than buyers. And again they could decrease the price close to what it was at the beginning of the day or may even less. And at the war that was between buyers and sellers, the sellers have been the winners of the day, and the market is largely in control of them. Thus, the possibility of further price decreases in the coming days is enormous.
Example: picture shows, currency pair of USD/JPY in a 30 minutes time frame.
At the beginning, by increasing investments of buyers, the price became to 103. But in this range with the arrival of large sellers to the market and overcome to turnover of sales on shopping transactions, the price decreased again. Sellers not even could push buyers to the price where it was at 102.3 in the beginning of the day, but with higher demand for selling, they could push the price even less than that it was closed at 102.1 in the ending of the day.
As what can be seen, after forming Shooting Star, a bearish wave started and the price have decreased more.
Weak Shooting Star:
For having successful and steady transactions, simple detection of market patterns is not enough. But with a deeper look, we should calculate the success possibility of each pattern. One of the determining power parameters of Shooting Star pattern is its body whether it is bearish or bullish. A Shooting Star with bearish body is stronger than a Shooting Star with bullish body.
The Open price of the day, is very important. This price - which is the Close price of the previous day - is in fact the price which buyers and sellers come to a balance, in the war in previous day. So on the day that the Shooting Star is forming, if seller can decrease price below the Close price of yesterday, and they can keep the price below it by the end of the day, they will be the strong winners of the war. But if they couldn't decrease the price below the Close price of yesterday, they are not conclusive winners of today’s war, and this war will continue for the next days.
Thus, if the body of Shooting Star is bearish, possibility of the beginning bearish wave is very high. But if the body of Shooting Star is bullish, possibility of the beginning bearish wave is less. In this case, it is said a weak Shooting Star is formed.
For more information on this article, please read “Professional parameters to determine the Strength of Hammer and Shooting Star”.
- The picture shows a standard Shooting Star candlestick pattern with bullish body.
As what can be seen, candle’s height is tall, but it has very short body height. Also upper shadow is very long, and the lower shadow is very short.
As regards the Close price of market is above its Open price, therefore the body of this Shooting Star is bullish. Hence its power is weak and possibility of the beginning bearish wave is less.
Example: The picture shows price of GBP/USD on 2012.02.29. As the picture says, sellers couldn't push the price below the Open price of that day. Thus, the final result of the war was not clear and buyers could again increase the price in the next day. (Consider the blue thick arrow)
But with the increment in price that increases the (Reward/Risk) ratio, attraction of sell transactions has increased, and new sellers have entered to the program. As a result, in the second day of the war, the price finally decreased below the Open price of the first day and with a serious lose in the market balance, prices began bearish wave rapidly.
If you want to learn more professional points of Shooting Star pattern. You can join "Secrets of Successful Traders" course and for more information, please read “Professional parameters to determine the Strength of Hammer and Shooting Star”.
Shooting Star, without a doubt, is among the most important and successful patterns used by all professionals in financial markets to enter to markets and make new deals. For more information, please read "Best Strategies to Enter the Market with Hammer and Shooting Star"
We also recommend to follow Shooting Star in the service "Daily Trading Opportunity (DTO)", to watch the Success of this pattern. To learn more and see how to combine this model with other technical parameters please read "Daily Trading Opportunity: Forming Shooting Star pattern in price".