Shooting Star Candlestick Pattern
The shooting star candlestick pattern represents a possible reversal to the downside, signifying a bearish reversal. The shooting star candlestick pattern is composed of a relatively small bearish body, either no, or, a small lower shadow and a significantly longer upper shadow.
Shooting Star Candlestick Pattern Analysis
The shooting star candlestick pattern is significant when it occurs in an established uptrend. It signifies a failed attempt for the rate to move higher, while also closing below the open value for that time period.
The shooting star candlestick pattern becomes increasingly relevant when the following occur:
- It is composed of a small bearish body with no, or a very small lower shadow and a upper shadow of significant length.
- It is preceded by a strong up trend.
- Confirmation candles are used to confirm the reversal.
- Overbought indicators confirm a change in market direction.
Forex Trading Ideas
The shooting star candlestick pattern may be traded alone, or with a combination of signals and/or indicators. For example:
- Step 1 – Wait for a shooting star candlestick pattern to appear during an established up trend.
- Step 2 - Confirm the trend reversal with at least one confirmation candle.
- Step 3 – Further confirm overbought conditions using the RSI – Relative Strength Index.*
- Once conditions 1 – 3 are met place an entry order.
*Additional confirmation ideas – confirm the shooting star candlestick pattern formation when it appears outside of the upper Bollinger Band or when the Stochastic Oscillator signals overbought conditions.
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