Shooting Star Candlestick Pattern (Complete Trading Guide)
Shooting Star candlestick pattern is a popular single candlestick pattern. It is a bearish candlestick pattern and it generally indicates a bearish reversal. Shooting Star candlestick is used by many traders as a part of an overall trading strategy.
There is a two candle version of shooting star candlestick pattern . It is also used as a bullish continuation pattern. In today’s article we will see the traditional single candle shooting star pattern in detail. However, some information about two candle version will also be discussed.
Here are some key aspects of traditional Shooting Star candlestick pattern
- It is a bearish candlestick pattern (bearish reversal to be precise)
- It occurs with medium to high frequency
- It generally occurs at the end of an extended uptrend or upward move in consolidation phase
- It is not used for trading on its own and needs confirmation from other indicators.
- Traders typically wait to see what the next candle (period) does following a shooting star. If the price declines during the next period they may sell or short.
What is Shooting Star Candlestick Pattern
The Shooting Star candlestick is one which has small real body and a long upper shadow or wick. Shooting Star candle generally has a small but nonzero real body .
It has an upper shadow or wick which is two to three times the size of the real body and it has no or very small lower shadow. The colour of the candle is not significant and can be green or red.
It generally occurs at the end of a uptrend suggesting a possible reversal. It can also occur at the end of up move during a consolidation phase also. It still indicates a bearish reversal though.
Here is a link to Wikipedia of Shooting Star. Here is a good video on Shooting star on Youtube.
Is a Shooting Star bullish or bearish?
A Shooting Star candlestick pattern in traditional analysis is a bearish reversal pattern. There is a two-candle shooting star method which can be used as bullish continuation method as well.
What Does the Shooting Star Candlestick Look Like?
A Shooting Star candlestick looks like what the name suggests !! , a Shooting Star. Below picture shows various versions of a Shooting Star candlestick.
There are main 2 versions , both share the same core construction but differ in who won the battle at the end of the timeframe. Though the Shooting Star candlestick pattern is always considered as a sign of bearish reversal, the candle can be green or red in colour.
The colour is not considered important for the interpretation. The Shooting Star should have very small or NO bottom shadows.
Shooting Star Versions : Single and two candle patterns
| Characteristic | Single Candle Pattern | Two Candle Pattern |
| Number of candle lines | One | Two |
| Price trend | Upward leading to the start of the candle pattern. | Upward leading to the start of the candle pattern |
| First day | Look for a tall upper shadow at least twice the body height above a small body. The body should be at or near the candle’s low, with no lower shadow (or a very small one). | A white / green candle. |
| Second day | A candle with an upper shadow at least three times the height of the body. The small body is at the bottom end of the candle and the candle has no lower shadow or a very small one. The body gaps above the prior day’s body. |
The two-candle shooting star pattern
The psychology behind the pattern starts with an upward trend leading to a white candle. The white candle means buying demand is helping price rise. The next day price gaps open upward and races to a new high, but then it closes much lower, near the day’s low.
The tall upper shadow means the rally could not be maintained and a downward turn might follow. In many cases, a downturn does occur but it’s not deep enough to cause price to reverse (meaning it fails to close below the first candle’s low). Price often resumes the uptrend before that happens
Frequency and importance of Shooting Star candlestick pattern
As per Encyclopaedia of candlestick charts following are the statistics for single and two candle version of Shooting star candle pattern.
| Characteristic | Single Candle Pattern | Two Candle Pattern |
| Number of candle lines | One | Two |
| Price trend | Upward leading to the start of the candle pattern. | Upward leading to the start of the candle pattern |
| Frequency rating ( 1 being the most frequent pattern) | 37 | 51 |
| Overall Performance / Accuracy to predict reversal (1 /103 being the best performing pattern) | 55/103 | 52 / 103 |
What does Shooting Star candlestick pattern mean?
For a daily candlestick chart , a Shooting Star candlestick will indicate the battle between bulls and bears in following way.
- The price opened at a particular point
- During the trading day, the bulls are dominant and force price much higher.
- By the day’s end however , the bears have managed a recovery by pushing price back down.
- The bears may manage to recover the price completely and closing price may end up lower than the opening price. This makes the candle red.
- In case , the bears do not manage to close the price below the open then the candle will be green.
- In both the above cases , the battle on that day was won by bears as they showed a sense of resistance in prevalent uptrend and hence this pattern is always considered as bearish, independent of the colour of the candle.
A red Shooting Star candle, however, is slightly more bearish compared to a green Shooting Star candle.
Shooting Star bearish Reversal
Shooting Star candlestick in an uptrend generally occurs after a sharp rise. It can also occur after a gradual rise but chances of Shooting Star occurring after a sharp rise are more due to the nature of the market.
Shooting Star candlestick after a prevalent uptrend can mean two things, it can mean a reversal into a downtrend. This can only be confirmed if the price closes above the low of the pattern. This can take anywhere between 2 to 8 days (or timeframes you are looking at)
It can also mean a small pullback or profit booking (this is experienced more than the actual reversal). The price on following days will go up again and if it breaks down above the high of the Shooting Star then one can take a trade on long side. This generally takes 2 to 9 trading days or timeframes you are looking at.
Examples of How to Trade Shooting Star candlestick pattern: Shooting Star trading strategy.
The Shooting Star candlestick pattern is generally used to identify reversal from a prevailing uptrend. There are different ways to trade it in both uptrend and downtrend. Lets take a look at both.
Trading Shooting Star pattern in uptrend
The best performing shooting stars occur during an extended uptrend. Oscillators indicating overbought region and momentum indicators indicating saturation. During this period a shooting star is a first sign of weakening uptrend.
Shooting Star candlestick pattern cannot be traded on its own and it needs additional information and confluence of other support regions such as previous support and resistance , moving average or Fibonacci levels.
A Shooting Star candle especially a red Shooting Star at the end of 150 % Fibonacci extension works better than others. Stop loss can be placed at the top of the Shooting Star or a previous high.
A Shooting Star candle wick rejecting a significant moving average is probably the best place to trade using a Shooting Star candlestick pattern.
It is very difficult to trade the shooting star in uptrend because you are trying to predict the exact market top and, on most occasion, you will fail to do so.
One must use other signals to confirm reversal before taking a trade and shooting star should be only used as guideline.
Trading Shooting Star pattern in downtrend
Trading a shooting star at the end of an upward pullback in prevalent downward trend can also be a good choice. The pattern performs quite well in such situations. Traders generally look for the pullback rejecting a moving average or a Fibonacci level confirming that the prevalent downtrend is going to continue.
Aggressive traders can take entry at these resistance levels or conservative traders can wait for the price to break below the star low to take the trade.
Using Shooting Star as resistance level
A long wick Shooting Star which successfully resulted into a trend reversal is also considered as a very good resistance level. Price coming back to this level in future is likely to be rejected again.
Shooting Star occurring along with a spinning top or other bearish patterns together also increases the chance of Shooting Star to work.
While using Shooting Star candle as resistance level, one should be using the bottom of the wick and not the real body of the candle.
Limitations of Shooting Star Candlestick Pattern
There are 3 main limitations of using Shooting Star candlestick pattern.
- Depending on the length of the top shadow , if one takes a trade after a breakout of the low of the Shooting Star, the stop loss distance is very high. Sometimes the top wick of the Shooting Star is very long, and it makes practically impossible to take a trade with such a large stop loss.
- Second main disadvantage of the Shooting Star is that, it does not indicate anything about a possible price target if the trade goes in your direction. One generally has to go with a 1 : 1 or 1 : 2 risk to reward ratio depending upon the length of top wick.
- Third disadvantage and not the least is that it appears too often and, in most cases, gives a false alarm !
Shooting Star vs Hanging Man Candlestick Pattern
The basic nature of the candle in both Shooting Star and Hanging man is similar. Both consist of a small real body and a long shadow or wick.
Main difference is that in case of a hanging man the wick or shadow is at the bottom while in Shooting Star it is at the top. Both of them also indicate a reversal.
Both happen in an uptrend and indicate a bearish reversal signal.
Shooting Star vs Inverted Hammer : are they same ??
In isolation both patterns look similar. Both have the same candle construction of a small body and a long top wick or shadow.
The main difference lies in the fact that the shooting star appears at the end of uptrend while an Inverted hammer appears at the end of a downtrend.
Shooting star is traditionally used as a bearish reversal and inverted hammer is used as a bullish reversal.
There are two candle versions of both . The two-candle version of inverted hammer can be used as a bearish continuation pattern while a two-candle version of shooting star can eb sued as a bullish continuation pattern.
Spinning top vs Shooting star candlestick pattern
Both spinning top and shooting star have small body non-zero body and long wicks. The main difference between a shooting star and Spinning top is that the shooting star has no wick on the bottom side , while spinning top has wicks on both sides.
Shooting star generally comes at the end of an uptrend and indicates bearish reversal , whereas Spinning top indicates indecision in the market.
Shooting star is a bearish pattern , while spinning top has no bullish or bearish bias.
Associated Candlestick patters
Doji , Spinning top , Hanging Man, Hammer , Inverted Hammer