Shooting Star Candlestick Pattern: A Simple Guide for Confident Trading

If you’ve been trading for a while, you’ve probably come across the Shooting Star pattern. It’s one of the simplest trading strategies to spot potential reversals, yet many get caught in false signals. This pattern can signal that an uptrend is running out of steam, but like any trading tool, it needs context and confirmation.

This guide breaks down the Shooting Star pattern, how to identify it, the psychology behind it, and how traders typically use it in different market conditions.

The Shooting Star is a bearish reversal candlestick pattern that appears after an uptrend. It has a small real body near the low of the candle, a long upper wick, and little to no lower wick. This structure suggests buyers attempted to push the price higher but were ultimately overpowered by sellers, causing the price action to close near its opening.

Key Characteristics:

• Appears after an uptrend.
• Small real body near the low.
• Long upper wick, at least twice the size of the body.
• Little to no lower wick.

Traders use the Shooting Star pattern as an early warning that an uptrend may be weakening and a bearish reversal pattern could be near.

The Shooting Star pattern is illustrated below.

• Occurs after a strong uptrend.
• Small body near the bottom of the candle.
• Long upper wick, showing initial buying pressure due to lack of price advance in the charts. .
• Daily charts show little or no lower wick.
• Bearish candle confirmation (e.g., a lower close on the next candle) strengthens the pattern’s reliability.

Understanding why the Shooting Star forms is key to using it effectively.

1. Buyers try to push higher: The session opens, and the price increases
2. Sellers step in: After reaching a new high, selling pressure builds, pushing closing prices lower.
3. Weak close near the open: The market finishes near the session’s opening price, showing that bullish momentum was rejected.

This pattern is a technical indicator of the fact that buyers are losing control and sellers are gaining strength, increasing the probability of a downtrend or correction.

Market Conditions

• Best suited for trending markets: The Shooting Star is most effective when it appears after a strong uptrend.
• Less effective in choppy markets: A Shooting Star might signal temporary resistance rather than a true reversal if the market is ranging.

Volatility Considerations

• High volatility: If volatility is high, the Shooting Star may produce false signals. Confirmation from the next candle is crucial.
• Low volatility: The pattern may carry more weight in a calm market, but price movements could be slower.

• Breakout continues: If the price action breaks above the high of the Shooting Star, the bearish signal is invalidated.
• Weak follow-through: A Shooting Star with no bearish confirmation candle is unreliable.

To trade the Shooting Star in a systematic approach:

1. Scan for a strong uptrend before the pattern forms.
2. Identify a Shooting Star with a long upper wick and a small body.
3. Require confirmation: Enter short only if the next candle closes lower.
4. Set stop-loss above the high of the Shooting Star.
5. Backtest the strategy before using it in live trading.

Remember, no single candlestick pattern is 100% reliable. Always test ideas before risking real money.

Below is a simple AFL script to detect the Shooting Star in Amibroker:

// Shooting Star AFL Code for Amibroker

Uptrend = Ref(Close, -1) > Ref(Close, -2) AND Ref(Close, -2) > Ref(Close, -3);

BodySize = Abs(Open – Close);

UpperWick = High – Max(Open, Close);

LowerWick = Min(Open, Close) – Low;

ShootingStar = 

    Uptrend AND 

    (UpperWick > 2 * BodySize) AND 

    (LowerWick < 0.1 * UpperWick) AND 

    (BodySize / (High – Low) < 0.3);

PlotShapes(IIf(ShootingStar, shapeStar, shapeNone), colorRed, 0, High);

This script finds Shooting Stars in an uptrend and marks them with a red star.

Links to articles about other Candlestick Patterns

1. Doji
2. Hammer
3. Inverted Hammer
4. Bullish Engulfing
5. Bearish Engulfing
6. Morning Star
7. Evening Star
8. Shooting Star
9. Hanging Man
10. Piercing Pattern
11. Dark Cloud Cover
12. Three White Soldiers
13. Three Black Crows
14. Dragonfly Doji
15. Gravestone Doji
16. Spinning Top
17. Marubozu
18. Tweezer Top
19. Tweezer Bottom
20. Bullish Harami 
21. Bearish Harami
22. Rising Three Methods
23. Falling Three Methods
24. Bullish Abandoned Baby 
25. Bearish Abandoned Baby 
26. Bullish Kicker 
27. Bearish Kicker
28. Three Inside Up
29. Three Inside Down
30. Upside Gap Two Crows
31. Mat Hold
32. Upside Tasuki Gap
33. Downside Tasuki Gap