Shooting Star: What hits your brain when you hear this term?
Probably something was getting extremely close to the Earth!
But what’s the correlation of that with trade? We’ll tell you!
Shooting star candlestick is a bearish pattern in trade’s technical analysis that possibly has a stringent upper body but no lower body at all!
As per research, the shooting star market acts bearish 59% of the time and the overall performance rank of the pattern is 55, where all rankings are out of 103.
But what does that indicate, and what leads to the pattern?
In this blog, we shall briefly understand the shooting star candlestick pattern in the financial market but with precise information!
Let’s dive in!
What Is A Shooting Star Pattern?
A shooting star candlestick is a trading chart pattern that forms after an uptrend. When elucidated, it means that a shooting star candlestick’s formation happens when securities open and advance.
Later, it closes the day and opens again around that time.
Not all candlesticks can be considered shooting stars. It only happens when the formation occurs at the time of Price advancing.
Another essential pointer in the candlestick shooting star pattern is:
The distance between the opening price and the highest price in the day = 2 Times the body of the shooting star.
Note:
The shadow should be little to none down the real body.
What does a Shooting Star Convey?
In this context, there are two critical questions that a trader needs to find answers to upon encountering a shooting star candlestick in the technical chart pattern:
#1. Is A Shooting Star Extremely Bearish?
Shooting stars are inclined to be highly bearish because, in this phase, the bear could reject the bull and close the opening price, pushing the prices extensively.
A shooting star can be less bearish when open and close are approximately the same, but it is still bearish!
#2. What’s Spotting Resistance In A Shooting Star Pattern?
The upper shadow of the Shooting Star indicates the market’s testing to allocate the supply and resistance.
Upon finding the resistance area, which is the day’s high, bears try to push the prices, and the ending day price subtly starts to match the opening price.
This is when a bullish advance gets subdued by the bears.
Shooting Star Trading Examples
Some pointers that are important to consider while trading Shooting Star includes:
- Trade Entry: Before entering the shooting star trade, it is essential to ensure that the trend before was an active bull trend.
- Stop Loss: Your trading preference should always be in the stop-loss order while dealing in shooting star candlesticks.
- Profits: The target prices must equal the shooting star pattern size.
Here is an example of the Shooting Star candlestick pattern in the Nifty daily chart.
It is visible how a stronger uptrend has led to the formation of a shooting star and implies a bearish reversal.
Conclusion
What you need to pick from here is that you must rely on something other than a candlestick pattern for making crucial decisions. However, shooting star being a small indicator in a trading decision, we can’t get into a trade based on this alone.
Instead, along with shooting star pattern analysis, traders must focus on the core concept of demand, supply, and price, for which you can seek help from experts.
If you are looking to open a Demat account, you can get started by filling out your details here, and an expert will reach out to you to ensure you are all set to make the most profitable trade decisions in the long run.
