Hello dear readers.
You may have noticed that each
candlestick in price charts is different from the others. So, have you thought
about what signals this difference can give us? There is a reason behind the
formation of each candlestick, and it can partially or completely predict where
the price will go in the future. These candlesticks form patterns, either alone
or in pairs (or more). Today, I will talk about one of them, the "Shooting
Star" candlestick pattern.
 |
| The Shooting Star Candlesticks |
- Topic: Shooting Star
- Type: bearish
- Trend direction: reversal
- Opposite pattern: Hammer
What is the Shooting Star Candlestick Pattern?
The Shooting Star is a candlestick pattern consisting of a
single candlestick. This pattern is often seen at the end of an uptrend and can
indicate a trend reversal. When the Shooting Star pattern appears, the
possibility that the bullish trend is slowing down or reversing highly
encourages bears. A price decline may now become inevitable.
Why is the Shooting Star Candlestick Pattern Named Like This?
The name of the "Shooting Star" candlestick
pattern is given based on the appearance and meaning of the candlestick. The
Shooting Star candlestick resembles a falling star with a thin line dropping
from top to bottom. This pattern, with its long upper shadow, resembles a star
shooting and falling rapidly in the sky. In other words, the appearance of this
pattern is similar to a shooting star in the sky. When interpreted, this
pattern indicates the end of an uptrend and a possible reversal to a downtrend.
This can be interpreted as an abrupt end to an uptrend. Therefore, the name of
the Shooting Star pattern represents a sudden drop.
How is the Shooting Star Candlestick Pattern Formed?
The Shooting Star usually appears in a bullish market,
indicating weakness and signaling that the uptrend is nearing its end. Looking
at the structure of the pattern, we can see that it consists of a single
candlestick. One of the most prominent features of the pattern is its long
upper shadow. The shadow reflects that prices rose at the peak of the trend but
then sellers stepped in and pulled prices down. As a result, the candle forms a
small body with a close near the open. The small body can be of any color and
is not of great importance. Therefore, the Shooting Star pattern indicates that
prices may undergo a downward reversal.
How to Trade the Shooting Star Candlestick Pattern?
The Shooting Star is a candlestick pattern that can signal
the beginning of a bearish market. Therefore, when observed, we may consider
that prices could start to decline. However, the reliability of the pattern is
low when used alone. It should be evaluated together with other technical
analysis indicators. Additionally, waiting for the confirmation candle to close
downwards before entering a short position will provide more reliable results.
Selling (Short): Opening a short position below the closing
price of a Shooting Star candlestick may align with the expectation of prices
falling.
Stop Loss: At the point where the Shooting Star pattern
forms, a level such as a resistance level or the peak of the pattern's upper
shadow can be used as a stop loss level.
Target: You can determine targets using risk-reward ratios,
moving averages, Fibonacci retracement levels, or other technical indicators.
The "Shooting Star" pattern on the Spot Gold/USD
chart appears at the end of an uptrend, causing the downtrend to start. An
example is given in the image below:
 |
| Shooting Star in XAU/USD. |
Please keep in mind: Remember that no candlestick pattern provides absolute accuracy in trading signals. The Shooting Star pattern usually indicates a price decline, but it may not always do so. The reliability of this pattern should be evaluated with other technical indicators. Additionally, market conditions and other factors should be considered. There are always uncertainties and variations in Forex market, so making trading decisions solely based on a pattern can be risky. Conducting a comprehensive analysis and considering risks would be healthier than relying solely on a single pattern for trading decisions.