A shooting star appears on an uptrend. Price opened at a low and was pushed higher by the buyers but later the sellers come in and drove the prices down closing below the open.
The formation of a big red candlestick after the shooting star is a good confirmation for an entry point. This shows that the buyers have given up and are out of market.
Example of a Shooting star on a candlestick market chart
Like i mentioned before, formation of a shooting star after an extended uptrend is good confirmation for a sell entry.
In our NZD/CAD monthly chart above, you can clearly see how the marked price started to fall after the first shooting star of Nov 2016 and then later completely reversed to the down side after the 2nd one of June 2017 until now (Dec 2017). 6 full months of profit
A shooting Star may also appear as indicated on the chart below
This clearly shows the transition of interest from buyers to sellers
Inverted hammer and a Shooting star
An inverted hammer looks like a shooting star. Both have small real bodies at the lower end of the candlestick and long upper shadows. It reverses a down trend unlike for a shooting star which reverses an uptrend.
With reference from the illustration above, we can tell that an inverted hammer appears during a downtrend, it is a signal that the trend is weakening and may reverse. The next blue candlestick after an inverted hammer gives a confirmation for the reversal.
An Inverted Hammer on the Market Chart
Let’s see how it appears on the market chart.
Inverted hammer is a bullish reversal pattern. It looks like a shooting star only that as a shooting star appears in an uptrend, an inverted hammer appears after a long downtrend.
When you notice this form especially on a support, prepare for a probable change in the trend direction.
What you should know is that the colour of a shooting star and an inverted hammer does not matter. It is the position in which they appear that matters.
How long you should hold an open position, is a personal thing for all traders. The decision is all yours. You know what your goals are as a trader, the kind of strategy you use to trade. All this starts from what you are? and What you want? If I am to answer, this...