The shooting star is one of the favorite single candlestick patterns after hammer. I have discussed the hammer candlestick pattern in the previous article. The shooting star is a very strong reversal pattern if traded with some discipline.

Properties of Shooting Star –

  1. The shooting star is single candle bearish reversal pattern
  2. The shooting star has a small real body at the lower end of the candle, practically it has very small or no wick.
  3. The color of a candle doesn’t matter, only thing matter is where it is being formed.
  4. The Long Upper shadow at least twice that of a real body.

This is how a shooting star looks like. The stock is already in an uptrend. Bulls try to push stock further up. They succeed somewhat, but bears take the control and push the stock lower and they manage to close stock at a lower price. The color of candle really doesn’t matter.

How does this pattern work?

Observe the following chart of L&T. In the first chart I have marked one weekly candle of the stock L&T from 29 Jan to 2 Feb 2018 and in second chart I have used an hourly chart of L&T from 29 Jan to 2 Feb 2018.

In the above chart of L&T weekly, I have marked Hammer with an orange rectangle box. When the stock is in an Uptrend, bulls are the dominating force at that movement and they keep dominating by making strong bullish candles until the bears getting activated and then made stock to close on the lower side of the candle.

Here in this chart, the action between two red vertical lines indicates the trading from 29 Jan to 2 Feb 2018. The stock was in an uptrend and opened equal to low on 29 Jan and was trading in the range. Now, tug of war takes place between the bulls and the bears. Finally, bears took control and manage to keep the stock on lower levels. And again stock opened gap up but failed to maintain the higher levels and close on the lower level on weekly close.

Psychology –

If the stock is in an uptrend, bulls are happy with their long positions as they are enjoying profits in their long positions and keep on buying and pushing the stock up. At some point, bears started taking control and pushing the stock down. Now, bulls started feeling pressure and to close their long position they start selling at higher levels and started pushing the stock down.

Identifying Entry –

While trading in any timeframe you will observe many shooting star formations but choosing the right entry is the most important thing to trade with a shooting star. If we trade on both shooting star we will be stopped out.

Here in this stock both shooting star patterns failed. It satisfies all condition required for a shooting star, the stock is in uptrend upper wick/shadow is twice of a real body. The reason is close of a candle after the shooting star is above the close of a shooting star. This is one type of observation will help to develop discipline while taking trade using shooting star. Adding one confirmation candlestick (Close of current should be below of shooting star close) after shooting star will improve success ratio of the pattern.

Examples – 

Yes Bank Daily Chart –

IndusInd Bank Ltd Shooting Star at Resistance Area –

ICICI Bank Shooting Star at Trendline Resistance –

ICICI Bank Intraday Shooting Star – 

Using the above charts, you must have got an idea about how to trade the shooting star candlestick pattern. In the next post, I will cover multi-candlestick pattern and after finishing the candlestick patterns, I will start supply and demand trading.

Disclaimer –

The information is for educational purposes only and does not constitute an offer to sell nor a solicitation of an offer to buy any security which may be referenced by me. The information provided through my charts is for personal, non-commercial, educational use and display. 

 


9 Comments

Bhavesh Karia · December 25, 2018 at 3:05 pm

awesome

    Naren Kadam · December 25, 2018 at 9:40 pm

    Thank you

bharath adepu · December 25, 2018 at 6:20 pm

Very gud explanation from u sir, its a spoon feeding explanation, thx a lot

    Naren Kadam · December 25, 2018 at 9:39 pm

    Thank you

VINAYAK BHOSALE · December 25, 2018 at 6:35 pm

sir,does hammer and shooting star candle are reliable in 5min chart,especially in bank nifty.hourly chart produces more reliable signals ,but wait is long and also opportunity is missed on hourly chart.
want to trade 5min chart of bank nifty more accurately, any suggestion for bank nifty?

    Naren Kadam · December 25, 2018 at 9:43 pm

    I will suggest you try and backtest on 15 min then switch to 5 min. I personally prefer 15 min chart for intraday sometimes 5 min also.

bharath adepu · December 28, 2018 at 8:53 pm

Hi Naren, if a stock is in uptrend nd forms inverted shooting star(which is opposite to the above mentioned) then wat we shud do ?

    Naren Kadam · January 6, 2019 at 8:21 pm

    Sir, it will be treated as hanging man candlestick pattern

Thirumala Prasad · December 30, 2018 at 8:26 pm

Awesome description

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