Candlestick patterns are among the most dependable trading strategies available to traders. When it comes to the shooting star chart candlestick pattern.
We must distinguish between a bearish shooting star and a bullish inverted hammer pattern. They are very similar but give completely different signals. While shooting star patterns are simple to spot. It is important to remember that candlestick patterns should not be the sole reason you enter a trade.
Indeed, experienced traders are always looking for a convergence of different indicators and patterns. Because multiple confirmations greatly increase the likelihood of a successful trade. So, without further ado, let’s get right into the shooting star candlestick pattern explanation.
What Is Forex Candlestick Pattern ?
Candlestick patterns are all patterns that are associates with the formation of candlesticks. A candlestick chart depicts the price movement of any given security or asset over a given timeframe. For example, if you choose the weekly chart as your timeframe.
One candlestick represents the price movement of your chosen pair over one week. A candlestick is made up of a wick and a body. While the body displays the opening and closing prices for the given timeframe. The wick displays where the price was during that timeframe. The position and formation of the candlestick indicate whether it is shooting star bullish or shooting star bearish.
What Is Shooting Star Candlestick Pattern?
Because the shooting star candlestick pattern is a bearish candlestick pattern, it indicates that we should sell our position or open a short position.
It must appear following an uptrend and usually marks the end of that uptrend. While the shooting star pattern may indicate a potential sell-off, it may be invalidate if the candlestick pattern is follows by an uptrend continuation.
However, this is less common because an uptrend is usually follow by a price correction to the downside after such a candlestick pattern is form. That is why it is a pattern and not just a random, insignificant candlestick.
Example of Forex Shooting Star Chart Pattern
Assume you’re interested in the Barclays share price, which starts the trading day at $339.60. The share price begins to fall, reaching $334.30, before rapidly rising due to good news within the company, reaching a high of $379.60. It finally settles at $342.30. These movements result in a shooting star candlestick, as shown below.
The Shooting Star Pattern’s Advantages in Technical Analysis
One of the primary advantages of the shooting star pattern in technical analysis is its ease of identification. Furthermore, it is reasonably reliable in detecting a bearish reversal, particularly if it appears near a resistance level.
Remember that the shooting star candlestick should never be alone. Before acting on the formation, use technical indicators to confirm the signal. For example, if you believe that a shooting star at the top of an uptrend indicates a possible reversal, you can use Fibonacci retracement to test the bearish bias. This indicator can predict how far a market will deviate from its current trend.
Candlestick Analysis’ Limitations
It is critical to recognize that one candle is frequently insufficient to estimate the likelihood of a potential reversal. First and foremost, the timeframe is a critical factor in determining the significance of candlestick analysis. The candlestick pattern becomes more significant as the timeframe increases. A shooting star in the weekly chart, for example, is more bearish than a shooting star in the 4-hour chart.
In summary, As previously stated, the shooting star pattern is an important candlestick formation that can assist us in determining the end of a major uptrend or a minor pullback within a downtrend. It is critical to understand not only the anatomy of the shooting star pattern, but also the conditions under which it is most effective.
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