Top reversal pattern: shooting star

In many cases, when the stock price peaked, some special signals will be released.

If you learn to identify potential top signals, it will not only help investors to escape the top smoothly, but also have the opportunity to earn additional income.

This article will introduce a bearish reversal candlestick pattern: Shooting Star.

What is Shooting Star?

Shooting Star is a single candlestick pattern that usually appears in an uptrend, implying that the market may reversal from bullish to bearish.

The entity of the shooting star is very small, the upper shadow is very long, the lower shadow line is very short or not. In general, the length of the shadow of a Shooting Star is at least twice its physical length.

Morphically, Shooting Star and Inverted Hammer line is very similar, the difference is that the inverted hammer line appears in a downtrend, implying that the market may reversal from bearish to bullish.

How was the shooting star formed?

At the top of the uptrend, long interest weakened, market pressure increased, this time may appear shooting star form.

When the shooting star appears, the stock price usually opens high and pulls up further in the intraday. This upward momentum can be understood as a continuation of the previous bullish sentiment.

However, over time, the market began to turn, and sellers gradually entered, pounding the stock price close to the opening price, resulting in the day's candlestick with a long upper shadow and small entity at closing.

Shooting Star form shows that the long is losing control of the market, and the short can quickly dominate.

If the candlestick on the next trading day falls below the Firing Star entity, the bearish signal is expected to be confirmed and the market may turn or fall by rise.

How to identify Shooting Stars?

In actual combat, investors can focus on the following key points to identify Shooting Star patterns.

• Uptrend

Shooting Stars usually appear in an uptrend, which is an important feature of the pattern that distinguishes it from the inverted hammer line. An uptrend means that the price continues to rise over a period of time.

• Long Shadow

Shooting Stars with a long upper shadow line, indicating that the longs once pushed the price forward, but most of it fell back in the day. Generally speaking, the length of the upper shadow should be more than twice the solid, at the same time, the lower shadow of the shooting star is very short, or there is no lower shadow at all.

• Small Solids

Shooting Star entity relative to the long shadow, it is relatively small, that is, the closing price compared to the opening price does not change much. On the other hand, the color of the entity can be green or red, that is, the shooting star can be both a positive or a yin.

• Confirmation of morphology

If the price closed below the Firing Star entity on the next trading day, the bearish signal is expected to be confirmed. However, once the price breaks through the top of the Shooting Star line, the pattern will declare a failure.

case analysis

Below, as an example, we take the pattern of shooting stars that Lockheed Martin (NYSE:LMT) shares appear on the daily chart.

• Lockheed Martin shares were on a strong upward trend before Shooting Stars.

• On the day of the shooting star appears, the stock price opened high.

• Intraday, the stock price went further higher and reached a stage high.

• Subsequently, share prices retreated most of the day gains due to weakening interest in bulls and increased market overrun. As of closing, the share price is slightly higher than the opening price, forming a shooting star pattern with long upper shadows and small entities.

• The share price fell sharply on the next trading day following the appearance of Shooting Star, further confirming the bearish signal released by the pattern.

summed

Overall, Shooting Star is a bearish reversal candlestick pattern that usually appears in an uptrend.

This pattern helps investors determine when to lock in long returns or short entry. However, trading with Shooting Stars does not always work.

Remember, a single candlestick is not enough to reflect the full picture of the trend. In actual combat, investors should combine with other technical analysis tools to better support investment decisions.