A shooting star is formed when the stock price at some point of the day is above the opening price but closes lower than the opening price.
What makes a shooting star?
> A shooting start MUST be on an UPWARD/BULLISH trend.
> The body of the shooting star is at least half of the distance between opening and highest price of the day
> The lowest price and close price of the day is minimal or the same.
> An inverted hanging man What does a shooting star look like?
> Small body
>Long wick above the body
> One little or no wick below the body
This is an example of a shooting star that I made via excel.
What does it mean?
> Long wick represents resistance for further bullish movement
> A bearish reversal will be coming
How can we use the shooting star for trading?
> Can act as a confirmation or an entry point at the level of the previous candle
> Potential price highs and reversals
> For best results look for at least 3 consecutive rising candles on the UP TREND -When this occurs impatient people will BUY stock instead of waiting for a “pullback”
Psychology
> Those who bought early will sell at a profit
> Shorts will enter the stock causing a price fall
> Next candle will be confirmation whether it is a shooting star or a continuation
> Next candle must fall under the highest price – this is buyers who over paid as the price falls representing reversal and can bring about a pullback and turn into a trend reversal
Hey Goyamon
Personally I use them on the daily charts or hourly inter-day to see if there is a reversal so I can use them to enter at a lower price. You could use them at a shorter range but I am more or a swing trader
Hi Karo,
If anyone uses the right TA, would they be able to catch a shooting star? Would you recommend a 5-minute chart to catch a shooting star?