A shooting star has a small real body and a long upper shadow. The color of the real body of the shooting it doesn’t really matter as it can be both red or green and the significance of the star to be the same.
A shooting star fall into the category of bearish reversal patterns and as such it must come after a market rally, signaling possible exhaustion to the upside. The higher the time frame a shooting star appears, the more powerful the pattern.
Now let’s try to imagine such a pattern, with price rallying from the downside, and all of a sudden, a candle appears with a long upper shadow and quite a small real body. It means bears are trying to take control, or at least to test the market to the downside for a bit. A powerful shooting star will be followed by a gap lower on the opening of the next candle, but this is not mandatory. Sometimes when market looks exhausted there is a sequence of more than one shooting star, a group, and that is an even more powerful pattern to the downside.
On the recording that goes with this chapter I will show you different shooting stars on different charts and how they should be treated.