Shooting star candlestick: which of three identical stars is the strongest?

ABCPick one, then read the solution.

Show the solution

Solution: B. It is the only star that took liquidity. Two equal highs held the stop losses of sellers and the buy stops of breakout traders. B's wick ran those orders and the candle closed back below them. The next candle broke the last swing low, a change of character that confirms sellers took over. A formed in the middle of a rising market with nothing above it. C formed after the drop and the very next candle closed above its high.

Cancelled if a candle closes above B's high. Above that wick the sweep idea is wrong.

Illustrative diagram, not market data.

What makes a shooting star

A small body near the bottom of the candle, a long upper wick at least twice the body, and little or no lower wick. Buyers pushed price up during the candle, sellers rejected the high and price closed near where it opened. The colour of the body matters less than the length of the wick and where the candle closes.

Three checks before you act on it

1. Location. Is the wick above a level that mattered: equal highs, a previous swing high, the top of a range?
2. The close. Did the candle close back below that level? A close above it is a breakout, not a rejection.
3. Confirmation. On a lower timeframe, does price break the last swing low after the star? That change of character is your signal that sellers are in control.

Why identical candles mean different things

Candles are summaries. The same open, high, low and close can come from a market running stops at a key level or from a quiet hour where one large order filled. The chart around the candle tells you which: a pool of liquidity above it, the reaction after it, and the higher-timeframe trend. That is why the study above asks you to look past the shape.

A simple short plan with a star

Wait for the star to close at a level. Drop to the 15-minute chart and wait for a break of the last swing low. Enter on a pullback, stop above the star's wick, first target at the nearest pool of liquidity below, such as equal lows. Size the position from your stop, not from a feeling: position size calculator.

Questions

Is a shooting star bullish or bearish?

Bearish when it appears after a rise and at a level: buyers pushed price up and sellers drove it back down before the close. In the middle of a trend or at a random price it is just a candle with a long wick.

What is the difference between a shooting star and an inverted hammer?

They have the same shape. A shooting star forms after a rise and warns of a drop. An inverted hammer forms after a fall and can warn of a bounce. The location gives the candle its name.

Do I need a lower timeframe to confirm it?

It helps. On the 15-minute chart under an hourly star you often see the sweep and then a break of the last swing low. That break is the confirmation; without it the star is only a warning.

Where do I put the stop?

Above the wick of the star. If price closes above it, the sellers who defended that high have lost and the idea is cancelled.