Shooting Star Candlestick Pattern: How to Trade Reversals

What Is a Shooting Star Candlestick Pattern?

In technical analysis, the Shooting Star Candlestick Pattern is one of the most powerful bearish reversal indicators that appears near the end of an uptrend. It signals that the market’s bullish momentum may be fading, making it a valuable tool for traders looking to spot potential turning points.

A Shooting Star has:

• A small real body near the session’s low,

• A long upper shadow (at least twice the body’s length), and

• Little or no lower shadow.

This pattern reflects a market session where buyers pushed prices up, but sellers took control before the close — often the first sign of a reversal.

How to Identify a Shooting Star Pattern

Traders can confirm a Shooting Star Candlestick Pattern by checking these key points:

• Appears after a sustained uptrend.

• Features a long upper wick showing rejection of higher prices.

• Closes near the day’s low, showing bearish dominance.

• Ideally accompanied by high trading volume during formation.

When these conditions align, it indicates that the uptrend might be losing strength, and a bearish reversal could soon follow.

Trading Strategy: How to Trade the Shooting Star Candlestick Pattern

1. Wait for Confirmation: Avoid entering immediately. Wait for the next candle to close below the Shooting Star’s low — this confirms bearish sentiment.

2. Enter Short Position: Once confirmation occurs, initiate a short trade or book profits on existing long positions.

3. Set Stop-Loss: Place your stop-loss above the Shooting Star’s high to minimize risk in case the pattern fails.

4. Profit Target: Aim for a 1:2 or better risk-reward ratio, or set your target at the next major support level.

5. Combine with Indicators: Use confirmation from tools like RSI (Relative Strength Index), MACD, or Moving Averages to strengthen your setup.

Example of a Shooting Star Pattern

Suppose a stock has been rallying for several sessions and opens at ₹500, surges to ₹520, but then drops and closes at ₹502. The long upper shadow indicates that buyers lost control, forming a Shooting Star candlestick.

If the following day’s candle closes below ₹500, it confirms a bearish reversal, signaling traders to enter a short trade or book profits.

If you’re looking to expand your knowledge of chart analysis, explore our comprehensive guide on Top 20 Candlestick Patterns to Make Profit — where we break down the most effective candlestick formations used by professional traders.

Disclaimer

This article is for educational purposes only and should not be considered financial or trading advice. Always consult a qualified financial advisor before making investment or trading decisions.