Shooting stars, an ever fascinating intergalactic spectacle. From when I was a kid, I was taught that if you make a wish when you see a shooting star, it will certainly come true. And ever since then, I was on the look out for one. If I sum up all the shooting stars I have witnessed till today, it will be a total of one. And I can't even remember if my wish back then came true. Maybe not, cause knowing myself, I would have wished for a million dollars.
Regardless of its wish granting prowess, seeing a star shoot out from the sky is a sight to behold for people of all ages. But not all shooting stars are meant to be beHOLD, there's this kind of shooting star that will make you want to let go of some things from holdings and it's the shooting star on your candlestick chart.
Shooting Star
A shooting star candlestick pattern is a one-candle pattern that has a short real body with a long upper wick and a short to no lower wick.
As described in the image above, the candle itself could either be red or green, bearish or bullish. However, the shooting star candlestick pattern is a bearish pattern, make no mistake about that.
This pattern indicates a strong opening for the asset with high buying pressure as evident on its long upper wick, but it also shows how the sellers stepped in and were successful in driving the price down closer to where it opened.
What Does it Mean?
A shooting star pattern, when confirmed and validated could mean a price reversal and a start of a down trend.
This pattern is only valid when it appears on the top of an uptrend. It can also be confirmed by the next candle. The next candle must conform to the same down trend with its high lower than the shooting star's high and it's closing lower than the star's closing.
When the confirmation for the shooting star is observed, traders tend to sell or short sell since the asset's price is expected to further decline.
Comparisons To Other Patterns
The shooting star candle pattern is awfully looking a lot like an inverted hammer candle pattern. Visually, they really are one of the same but the factor that spells all their difference is the pattern's placement of appearance. Shooting star pattern appears at the top of an uptrend, while the inverted hammer appears on the bottom of a downtrend. Just one difference and it means the whole world. The inverted hammer is a bullish pattern which signifies an expected increase of an asset's price while the shooting star is exactly its opposite.
Looking at its visual traits, it also looks like an inverted hanging man. Their difference is their longer wicks. The upper wick is longer in the shooting star while in the hanging man pattern, the lower wick is longer.
Conclusion
Since the shooting star is just a single candle pattern, it is easy to spot and its features are distinct. But like any other patterns or signs in the realm of cryptocurrency, this does not tell with a 100% certainty anything. Even if its existence is confirmed it may or may not have foretell anything when it comes to the long term trend of an asset. This is just a dot in the bigger picture which is the assets history.
Cautions must be exercised when trading using patterns like this shooting star pattern. It may be effective to define the short period of the asset's run but it does not necessarily dictate the price for a long run. You know, volatility and stuff. Many traders use stop-loss to control if any losses occur.
Hey there!!!
Thank you again for visiting. It has been a while since I posted a TA related article. I have been busy procrastinating nowadays, that's why. Anyhow, I'm here, you're here and as always, your thoughts and ideas are the things I'd like to hear. Drop by on the comment section before and let's share a drink.
Cheers!!!
References:
Image 1 : https://en.wikipedia.org/wiki/Shooting_star_(candlestick_pattern)#/media/File:Shooting_star_03.jpg
ELearnMarkets 2020, Shooting Star Candlestick - Formation, Example & Limitations, accessed 3 June 2021,<https://www.elearnmarkets.com/blog/shooting-star-candlestick-formation-example-limitations/>
Mitchell, Cory 2021, Shooting Star Definition and Applications , Investopedia, accessed 3 June 2021,<https://www.investopedia.com/terms/s/shootingstar.asp>
Venketas, Warren 2019, How to Trade Shooting Star Candlestick Patterns, DailyFX, accessed 3 June 2021, <https://www.dailyfx.com/education/candlestick-patterns/shooting-star-pattern.html>
Patterns Wizard n.d., Shooting Star Candlestick Pattern: What is it & How to trade it?, accessed 3 June 2021, <https://patternswizard.com/shooting-star-candlestick-pattern/>
Lead image: https://www.imore.com/animal-crossing-new-horizons-shooting-star-guide
The only candle that I remember was the memory of my childhood when we don't have electricity and to see how my brothers make something in the shadows and now this shooting star about crypto😂 a new learning has been recorded to my dictionary.
And I am still thinking like a mushroom, waiting for the rain and come out later.😂