Shooting Star
A shooting star is a bearish candlestick with a long upper shadow, little or no lower shadow, and a small real body near the low of the day. It appears after an uptrend. Said differently, a shooting star is a type of candlestick that forms when a security opens, advances significantly, but then closes the day near the open again.
For a candlestick to be considered a shooting star, the formation must appear during a price advance. Also, the distance between the highest price of the day and the opening price must be more than twice as large as the shooting star's body. There should be little to no shadow below the real body.
Definition: A shooting star is a bearish candlestick pattern that appears after an uptrend. It has a long upper shadow, little to no lower shadow, and a small body near the day's low. In other words, a shooting star occurs when a security opens, rises significantly, but then closes near the opening price.
Origin: The concept of the shooting star originates from Japanese candlestick charting techniques, which were first used by Japanese rice traders in the 18th century to predict rice prices. This technique was later adopted by Western financial markets and developed into various chart patterns, with the shooting star being a typical reversal signal.
Categories and Characteristics: The shooting star has the following characteristics: 1. It must appear during a price rise; 2. The distance between the day's high and the opening price must be at least twice the length of the body; 3. There should be little to no shadow below the body. The appearance of a shooting star usually indicates that the market may reverse from an uptrend to a downtrend, making it a bearish signal.
Examples: Example 1: In an uptrend of a stock, a shooting star appears with an opening price of 100, a high of 110, and a closing price of 101. Due to the long upper shadow and small body, investors might see this as a sell signal. Example 2: In the forex market, a currency pair shows a shooting star after a continuous rise, with an opening price of 1.2000, a high of 1.2100, and a closing price of 1.2010. This could also be seen as a signal that the market is about to reverse.
Common Questions: 1. Is a shooting star always an accurate reversal signal? Not necessarily, a shooting star is just one technical analysis tool and should be confirmed with other indicators. 2. How to distinguish a shooting star from other similar candlestick patterns? The key is the length of the upper shadow and the position of the body; the upper shadow of a shooting star must be at least twice the length of the body, and the body should be near the day's low.
