Shooting Star and Inverted Hammer

The Mirror Image

In the previous topic we studied the Hammer and Hanging Man — candles with long lower wicks.

Now we study their mirror images — candles with long upper wicks.

Same principle. Same rule — location determines meaning. But this time the story is told from the opposite direction.

What Does This Candle Look Like?

Both the Shooting Star and Inverted Hammer share:

• Small body at the bottom of the candle
• Long upper wick — at least 2 times the length of the body
• Small or no lower wick
• Body can be green or red

The long upper wick shows that buyers pushed price significantly higher — but sellers completely rejected that move and pushed price back down near the open.

The Inverted Hammer — Bullish Signal

Location: Appears after a downtrend or at a key support level.

What it tells you:
During the period — buyers pushed price significantly higher. Although sellers pushed it back down by close — the fact that buyers had enough strength to push that far up is encouraging.

Interpretation:
After a sustained downtrend — buyers are starting to show strength. The selling momentum may be exhausting.

Why it is bullish despite closing lower:
In a downtrend — any sign of buyer strength is significant. Buyers pushing price up dramatically — even if sellers recover — signals a potential shift in momentum.

Trading the Inverted Hammer:

• Wait for confirmation — next candle must be bullish
• Enter on open of confirmation candle
• Stop loss below the Inverted Hammer low
• Target previous resistance

Stronger signal when:

• Appears at major support after extended downtrend
• High volume on the candle
• Daily or weekly timeframe
• Green body preferred

The Shooting Star — Bearish Signal

Location: Appears after an uptrend or at a key resistance level.

What it tells you:
Buyers pushed price dramatically higher during the period — but sellers completely overwhelmed them and pushed price all the way back down to near the open.

Interpretation:
Buyers tried hard to continue the uptrend but sellers were too strong. This is a clear rejection of higher prices — a bearish signal.

Trading the Shooting Star:

• Wait for confirmation — next candle must be bearish
• Enter short on open of confirmation candle
• Stop loss above the Shooting Star high
• Target previous support

Stronger signal when:

• Appears at major resistance after strong uptrend
• High volume — especially if volume is higher than recent candles
• Red body — close below open
• Daily or weekly timeframe
• Appears at round number — $50,000, $100,000

The Four Pattern Family

You now know four related patterns:

Long lower wick patterns:

• Hammer — bullish — appears at bottom
• Hanging Man — bearish — appears at top

Long upper wick patterns:

• Inverted Hammer — bullish — appears at bottom
• Shooting Star — bearish — appears at top

The rule is simple:

• Long wick at the bottom of a downtrend = bullish signal
• Long wick at the top of an uptrend = bearish signal
• Direction of the wick does not change the rule

Upper Wick vs Lower Wick Psychology

Long upper wick psychology:
Buyers pushed hard — sellers crushed them.
“Buyers tried to take over — sellers won.”

Long lower wick psychology:
Sellers pushed hard — buyers crushed them.
“Sellers tried to take over — buyers won.”

In both cases — the losing side showed aggression but failed. This failure of momentum often signals a reversal.

Confirmation Always Required

As with all single candlestick patterns — never trade without confirmation.

Shooting Star without confirmation:
Price shoots up next candle continuing the uptrend.
You would have shorted into a rising market — a painful loss.

Inverted Hammer without confirmation:
Price drops next candle continuing the downtrend.
You would have bought into a falling market.

The confirmation candle is not optional — it is the difference between trading and gambling.

In the next topic we will study the Engulfing Pattern — one of the most powerful and reliable two-candle reversal signals.