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Japanese candlesticks – shooting star candle explained

The upthrust, or shooting star candle is one of the most profitable trading signals we can watch for on our candlestick charts, and as with all candle analysis, it makes no difference what time frame we are trading , the market, or indeed the instrument, as candle charts are common to all assets, whether you trade forex, commodities or equities. In this case the signal came on a daily stock chart, and we were helped further on this occasion by having volume to confirm our analysis. Nevertheless, the shooting star candle is one of a handful of signals that I use myself every day, as it can be a powerful signal of a weak market or one that is about to turn. As always we have to be patient and wait for the market to validate the signal. In simple terms, the shooting star is signalling that the bulls are running out of steam and the bears are beginning to take control of the market, and for a strong signal we need to see a small body ( which can be positive or negative ) and a deep wick to the upper body. The height of the wick should be at least three times the height of the body to qualify as a shooting star candle. The wick or shadow to the top of the candle, indicates that the bulls are trying to take the market higher, but have failed, falling back exhausted as selling pressure has prevented the market rising further, and therefore signalling a potential turning point.
In this case the signal was preceded by a small doji, following by a hanging man, before the large shooting star candle on the 16th, which was followed the day after by a wide spread down candle, suggesting further weakness on the daily chart. The following day we received an additional signal with another shooting star candle, accompanied by excessively high volume, a clear confirmation that the market was weak with the market makers struggling to sell into an unresponsive market. Following this clear signal we then sold, as the market slid lower, adding further confirmation to the move breaking below the short term moving averages and approaching the 200 day moving average below.
The shooting star candle is one you will see every day, in every chart, no matter what time frame you choose. It is one of the basic signals that every technical chartist learns, and if I had to trade just one signal, this would be it. If you are scalping in the forex markets then this is a classic, but with no volume to help us with our analysis, we must rely on additional signals such as support and resistance, moving averages, and Fibonacci to confirm this bearish signal. Its twin, the hammer, which we see after a sell off, or at the end of a bearish trend, is another strong signal, but on this occasion signals bullish sentiment entering the market, and a possible reversal higher as a result.