The Shooting Star is a formation that has the market taking a hard stab at a blow off to the upside but eventually failing and giving way to the sellers of the market. This indicates that trader sentiment may be shifting to the downside.
- It is a BEARISH reversal signal
- The one rule about the entry is that it has to be on a break of the previous day’s OPEN.
- It forms when the market trades extremely high during the day but turns and trades lower ultimately closing near the OPEN and LOW (The OPEN, LOW and CLOSE all are at roughly the same price)
- The high is double the length of the body of the candle
- The extreme high suggests that the bulls attempted to run the market higher and resistance was found
- Once this resistance was established the bears show up and forced the market lower
- What is impressive about this formation is the size of the upper wick (2x the body) and the early strength that this market had to not only be turned completely away but finished the day close to where we opened
- This formation is considered even more bearish if the trading session actually ends up finishing lower on the day
This is one of many formations that I identify and send out to my subscribers on a regular basis. I include trade ideas accompanied with risk and objective points for you to keep an eye on!
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