The shooting star is one of the most recognizable bearish reversal patterns in candlestick charting. When it appears at the top of an uptrend, it warns traders that the rally may be ending and a decline could follow. Understanding this pattern can help you protect profits and find short-selling opportunities.
What is a Shooting Star?
A shooting star is a single candlestick with a small body at the bottom and a long upper shadow (wick). The upper shadow should be at least twice the length of the body. There should be little to no lower shadow. It forms after an uptrend and signals a potential reversal.
The psychology: During the session, buyers pushed prices significantly higher, continuing the uptrend. However, sellers overwhelmed them and drove prices back down near the open. This rejection of higher prices shows that supply is increasing and the uptrend may be ending.
Shooting Star Requirements
For a valid shooting star pattern, check these criteria:
- Small real body at the lower end of the trading range
- Upper shadow at least 2x the length of the body (ideally 2-3x)
- Little or no lower shadow
- Appears after an uptrend (at least 3-5 green candles)
- Body color can be red or green, but red is stronger
Shooting Star vs Inverted Hammer
The shooting star and inverted hammer look identical, but they appear in different contexts and signal opposite directions:
Same Shape, Different Signals
- Shooting Star: Appears after uptrend = Bearish reversal signal
- Inverted Hammer: Appears after downtrend = Bullish reversal signal
Always identify the prior trend before naming the pattern. The location determines everything.
How to Trade Shooting Star Patterns
Step 1: Confirm the Uptrend
A shooting star only works as a reversal signal when there is a clear uptrend to reverse. Look for at least 3-5 consecutive higher closes or obvious upward price movement leading into the pattern.
Step 2: Look for Resistance
Shooting stars are most powerful when they form at key resistance levels. These could be horizontal resistance, a descending trendline, a round number, or a previous high.
Step 3: Wait for Confirmation
Do not short immediately when a shooting star forms. Wait for the next candle to close below the shooting star body to confirm the reversal. This reduces false signals significantly.
Step 4: Execute the Trade
Trading Setup Example
Stock XYZ has rallied from $80 to $100 over three weeks. A shooting star forms at the $100 resistance level with the high reaching $103 before closing at $100.50.
- Entry: Short when price breaks below the shooting star low ($99.50)
- Stop loss: Above the shooting star high ($103.50)
- Risk: $4 per share
- Target 1: Previous support at $90 (2.5:1 reward)
- Target 2: $85 level for larger moves
Real Trading Scenarios
Scenario 1: Shooting Star at All-Time High
A stock breaks to a new all-time high but forms a shooting star on that day. The lack of follow-through buying and the strong rejection of higher prices often leads to significant pullbacks. This is one of the highest-probability shooting star setups.
Scenario 2: Shooting Star at Moving Average Resistance
A stock bounces toward its falling 50-day moving average and forms a shooting star right at the moving average. The pattern confirms the moving average as resistance and often leads to a continuation of the downtrend.
Scenario 3: Shooting Star with Bearish Divergence
If RSI shows bearish divergence (lower highs) while price makes higher highs, a shooting star at that point has extra significance. Multiple bearish signals aligning increases the probability of reversal.
Volume Considerations
Volume adds important context to shooting star patterns:
- High volume shooting star: More significant, shows many traders rejecting higher prices
- Low volume shooting star: Less reliable, could just be lack of interest rather than active selling
- Volume spike on confirmation: Strong red candle with high volume after the shooting star confirms heavy selling
Common Mistakes When Trading Shooting Stars
- No prior uptrend: A shooting star shape in a sideways market is meaningless
- Skipping confirmation: Many shooting stars fail; always wait for the next candle
- Shadow too short: The upper shadow must be at least 2x the body length
- Lower shadow too long: A long lower shadow weakens the bearish signal
- Wrong timeframe: Shooting stars on 1-minute charts fail frequently; daily charts are more reliable
Shooting Star in Different Markets
Stocks
Shooting stars work well in individual stocks, especially after extended rallies. They are particularly effective when a stock has gone parabolic and forms a shooting star at a round number.
Forex
In forex markets, shooting stars on the daily chart at key resistance levels or round numbers (1.1000, 1.2000) often lead to significant reversals. The 24-hour nature of forex makes volume analysis less useful.
Cryptocurrencies
Crypto markets are volatile, so shooting stars can precede dramatic falls. However, the high volatility also means more false signals. Use wider stops and look for additional confirmation.
Managing Shooting Star Trades
Once you enter a short position based on a shooting star:
- Move stop to break-even: Once price falls 1x your risk amount, move stop to entry
- Scale out: Take partial profits at the first support level, hold remainder for larger moves
- Watch for hammer: If a hammer forms during the decline, consider taking profits
- Trail your stop: Use the previous candle high as a trailing stop as price falls
Analyze Your Shooting Star Trades
Pro Trader Dashboard tracks all your trades and lets you filter by pattern type. See your win rate on shooting star setups and identify what makes your best trades successful.
Summary
The shooting star candlestick is a powerful bearish reversal pattern that signals the end of an uptrend. It shows that buyers tried to push prices higher but sellers rejected them. Look for shooting stars at resistance levels, wait for confirmation, and always use a stop loss above the shooting star high. Combined with volume analysis and other indicators, shooting stars can help you identify high-probability short setups.
Learn more reversal patterns in our guides on evening star patterns and engulfing patterns.