Relevance: Bearish
Prior Trend: Bullish
Reliability: Low
Confirmation: Definitely required
No. of Sticks: 2
Definition:
Bearish Shooting Star Pattern suggests that prices may be approaching to a top. It looks like its name, a shooting star. The shooting star is a small real body characterized by a long upper shadow, which gaps away from the prior real body.
Recognition Criteria:
1. Market is characterized by uptrend.
2. We see a white candlestick in the first day.
3. Prices then open with a gap creating a small real body at the lower end of the trading range on the second day.
4. Upper shadow of the pattern on the second day is usually at least twice as long as the real body.
5. However; second day pattern has no (or close to none) lower shadow.
Explanation:
The Shooting Star simply tells us that the market opened near its low, then prices strongly rallied up and finally prices moved down to close near the opening price. In other words, the rally of the day was not sustained.
Important Factors:
Bearish Shooting Star Pattern is usually not a major reversal signal as is the evening star. The color of the real body is not important.
An ideal shooting star has a real body which gaps away from the prior real body. Nonetheless, this gap is not always necessary.
A confirmation on the third day is required to be sure that the uptrend has reversed. The confirmation may be in the form of a black candlestick, a large gap down or a lower close on the next trading day.
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