Charts for Beginners Shooting Star

Stock Market Charts for Dummies - Shooting Star Candlestick Bearish Reversal Pattern

For the basics on how to trade stocks online - click here for the no frills lowdown ---> how to trade stocks online

Understanding stock market charts is important for stock trading or investing. It is not necessary to understand the meaning of every tiny move but a knowledge of the basics that professional investors use will help in interpreting what is happening to a stock price, and more importantly, what it might do next.

As explained in a previous post - see candlestick stock charts for beginners - Japanese candlesticks are commonly used as they provide a lot of information in an easyily understood graphic format.

The pattern known as the shooting star is one of the more important candlestick patterns. It has a small body (which can be either white, black, green or red depending on the trading software you use) and a long upper shadow with a very small or even non-existent lower shadow.

The upper shadow needs to be at least double the length of the body and the difference between the high point and and the low point should be significant. The low/high range needs to be wide compared to the range for the last 10 to 20 days.

A candlestick is called a shooting star if it gaps up from the previous day. This is not a hard-and-fast rule however, particularly in so far as concerns trading indices and stocks, as it is not unusual for these to open near the close of the previous day. If there is a gap up this indicates a stronger shooting star, but even if there is no gap up the reversal still holds true.

A bearish reversal must also be confirmed. A reversal means that there are less buyers than sellers for one or more days, but there is no guarantee that it will continue. Confirmation is needed. This confirmation is provided if there are further moves to the downside, such as a gap down, major decline in volume or a long black candlestick. Bearish confirmation should be clear within 1 to 3 days.
This video from yourtradingcoach.com gives a more detailed explanation

Further reading : Investing in Stocks for Beginners

For how to trade the shooting star video - shooting star candlestick