Shooting Star Candlestick Pattern – 1 Pattern, 3 Secrets to Find and Use

Imagine a shooting star: it streaks high, then fades quickly. The Shooting Star Candlestick Pattern in trading works exactly like that.

But how it is related to technical analysis in the stock market?

Well, it indicates a bearish signal, appearing after an uptrend. Let’s discuss this in detail. 

What is Shooting Star Candlestick Pattern?

The Shooting Star Candlestick Pattern is a bearish reversal pattern. It usually occurs at the end of an uptrend. 

Characteristics of Shooting Star Candlestick Pattern 

It has:

Long upper shadow: The long upper shadow signifies that the price was rejected at the high of the day. The upper shadow should be at least twice the length of the real body.

A small real body: The small real body and lack of a lower shadow means that there is a selling pressure in the market that pushed the price back down near the opening price. The real body should be near the low of the day.

A little or no lower shadow: The lower shadow should be very short or non-existent.

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Formation of a Shooting Star Candlestick

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Trading Example with Shooting Star Candlestick

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What does a Shooting Star Pattern Indicate?

The Shooting Star Candlestick Pattern indicates a warning sign that the uptrend may be coming to an end. 

Here are some additional things to keep in mind about the Shooting Star Candlestick Pattern:

• The pattern is more significant if it occurs after a strong uptrend.

• The pattern is less significant if it occurs during a consolidation period.

• The pattern is more likely to be confirmed if it is followed by a downward price movement.

Also Check: How To Make Money Trading With Candlestick Charts | Updated 2024

Also Check: 35 Powerful Candlestick Patterns

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How to Use Shooting Star Candlestick Pattern?

This pattern signals a potential downturn in an uptrend. Here’s how you might use it:

Identify the pattern: Look for candlesticks with a long upper shadow, a small real body near the low, and little to no lower shadow.

Consider the market pattern: The pattern is stronger after a strong uptrend and weaker during consolidation.

Look for the confirmation: Look for additional bearish indicators like downward price movement or increased selling volume.

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How to Find Shooting Star Candlestick Pattern Using Screener 

Recently, I have started using StockEdge Screener to find the candlestick patterns. Here is the step-by-step guidance on how you can also find the stocks making Shooting Star Candlestick Pattern in Stock Market.

Step 1: Go to the “Candlestick Scans” and click on the drop-down to find “Bearish Reversal Scan”

Step 2: Here you can see the “Shooting Star” scan, click on that option.

Step 3: Once you selected, you can see a list of stocks forming a “Shooting Star candlestick pattern.” 

Additionally, use can also other screeners, like https://trendlyne.com/, https://chartink.com/, https://in.tradingview.com/ 

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Difference Between Shooting Star and Inverted Hammer

Basis of Differences	Shooting Star	Inverted Hammer
Pattern Type	Bearish reversal pattern: Indicates a potential downturn after an uptrend.	Bullish reversal pattern: Indicates a potential upturn after a downtrend.
Appearance	Long upper shadow (at least twice the real body) suggesting rejection at the high. Small real body near the low. Little or no lower shadow indicating selling pressure pushing price down.	Long lower shadow (at least twice the real body) suggesting buying pressure at the low. Small real body near the high. Little or no upper shadow indicating buying momentum.
Context	Shooting Star appears at the end of an uptrend.	Inverted Hammer appears at the end of a downtrend.
Trading implication	Shooting Star suggests a potential sell	Hammer suggests a potential buy

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Benefits of Using Shooting Star Candlestick Pattern

Simple to identify: Compared to other candlestick patterns, the Shooting Star has a relatively straightforward visual identification due to its long upper shadow, small body, and minimal lower shadow.

Potential trend reversal signal: When appearing at the end of an uptrend, the Shooting Star can warn of a possible decline, allowing traders to adjust their positions accordingly.

Confirmation opportunities: The pattern’s strength often increases when formed near resistance levels or followed by downward price movement, providing additional confirmation for bearish sentiment.

Psychological indicator: Some traders believe the pattern reflects the psychology of the market, where initial buying enthusiasm fades during the session, leaving selling pressure to dominate.

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Limitations of Using Shooting Star Candlestick Pattern

False signals: Like any technical indicator, the Shooting Star can generate false signals, leading to incorrect trading decisions. Confirmation indicators and proper risk management are vital.

Subjectivity in interpretation: Determining the exact length of shadows and real body size can be subjective, leading to inconsistent interpretations among traders.

Market context matters: The pattern’s reliability depends on the broader market context, trend strength, and surrounding technical indicators.

Not a standalone tool: The Shooting Star should be used in conjunction with other technical analysis tools and fundamental analysis for comprehensive decision-making.

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Conclusion

Hope, you get all your answers related to the Shooting Star candlestick pattern, like what is Shooting Star candlestick, how to use the Shooting Star candlestick in technical analysis, and how to find stocks. 

However, it is important to note that no single candlestick pattern is perfect, and the Shooting Star should not be used as the sole basis for making trading decisions. Other technical indicators and confirmation signals should also be considered.

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Frequently Asked Questions