Shooting Star Candlestick Pattern

The candlestick pattern shooting star, also known as the star candle pattern, is used to identify potential reversals in a downtrend. Crypto traders in the market use this pattern to determine the opportune moment to exit their positions.

KEY TAKEAWAYS

A shooting star is a bearish shooting star candlestick pattern that signals a potential reversal in an uptrend.
If the price moves upward following a shooting star, the formation may have been a false signal.
They could short-sell or sell if the price drops throughout the upcoming term.

WHAT IS A CANDLESTICK PATTERN SHOOTING STAR?

What is a shooting star candlestick pattern? Candlestick patterns explained as the shooting star Japanese candlestick. This pattern occurs when an asset suddenly reverses downward and is considered a bearish reversal candlestick pattern. It often appears at the peaks of uptrends.

This bearish candlestick has a long upper shadow, with a lower shadow that is small or nearly nonexistent. The candle's body is small and close to the day's low. The pattern forms when the security opens, experiences a significant price increase, but then closes near the opening price for the day.

What is shooting star patterns?

TYPES OF SHOOTING STAR CANDLESTICK

The shooting star candlestick has two common types, which are the red eyebrow shooting star and the green shooting star. Each type of shooting star has its characteristics and signals.

Red shooting star

The red shooting star indicates that the closing price of the security is lower than its opening price. A red shooting star is considered a stronger signal of an impending downtrend because the closing price is at the bottom of the candle. The red shooting star has a short candle body, a long upper shadow, and a very short or almost non-existent lower shadow.

Green shooting star

The green shooting star, on the other hand, represents the closing price of a security that is higher than its opening price. However, the price difference between the open and close is not very significant. This is also a star indicating a potential downtrend, although not as strong as the red shooting star.

CANDLESTICK PATTERN WITH EXAMPLE

Example of candlestick pattern (Source: investopedia.com)

Looking at the price chart, we can observe a rapid increase when the shooting star was formed in early June. The shooting star has a short body and a long upper shadow, symbolizing a price increase after opening high and closing near the opening price.

The chart also indicates that the highest point of the shooting star extends until September, suggesting a continued downward trend in the following months. Therefore, investors may use the shooting star as a reversal signal for the downtrend.

HOW TO TRADE WITH THE SHOOTING STAR CANDLESTICK?

The Shooting Star candlestick pattern is a short-term trading strategy used to identify potential trend reversals. To trade with the Shooting Star candlestick pattern, you can follow these steps:

Step 1: Identify the current trend and note that the shooting star is most effective when it appears at the end of a strong trend.
Step 2: Look for a shooting star candle with a short body and a long upper shadow.
Step 3: Confirm the signal with factors such as the length of the upper shadow; a longer upper shadow indicates a stronger signal.

After confirming the signal, you can proceed to place a trading order. If a red shooting star appears at the end of a strong uptrend, you may consider placing a sell order.

Conversely, if a green shooting star is observed, you might consider placing a buy order.

How to trade with the shooting star candlestick?

WHICH CANDLESTICK PATTERN IS BULLISH?

Several bullish shooting star candlestick patterns such as:

Hammer: Suggests buyers step in after a downtrend, pushing the price back up from lower levels.
Bullish Engulfing: The green candle's real body completely engulfs the previous red candle, signifying strong buying pressure overcoming sellers.
Piercing Line: It suggests buyers decisively taking control after a decline.
Morning Star: What is the morning star candlestick pattern? This three-candle pattern comprises a bearish candle followed by a small doji and then a bullish candle, hinting at a potential trend reversal.
Three White Soldiers: Indicates strong and sustained buying pressure driving the price higher.

The candlestick pattern shooting star is a simple candlestick pattern used to identify peaks in major cryptocurrencies. Beginners can also utilize this pattern as it can be applied to various timeframes of the chart.