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To evaluate the performance of the pattern in your stock exchange within the context of other global markets, please refer to the table below. Locate your stock market to see its ranking among others. This will provide insights into the pattern’s strength and reliability, aiding you in your buying and selling decisions.
BEARISH SHOOTING STAR
Definition
This pattern consists of a bullish (white) body followed by an Inverted Hammer, characterized by a long upper shadow and a small body. It is similar in appearance to the Bullish Inverted Hammer pattern. However, unlike the Bullish Inverted Hammer, the Shooting Star appears during an uptrend and signals a bearish reversal.
Recognition Criteria
1. The market is currently defined by a dominant upward trend.2. The first day of the pattern features a white candlestick.
3. On the second day, a small body appears at the lower end of the trading range. The color of this body is not significant.
4. The upper shadow of the second candlestick should be at least twice the length of the body.
5. The lower shadow is either very short or non-existent.
Pattern Requirements and Flexibility
The body of the Inverted Hammer should be small. The upper shadow must be at least twice the length of the body and not shorter than an average candlestick length. Ideally, there should be no or a very small lower shadow. The top of the Inverted Hammer’s body should be higher than the body of the preceding candlestick.
Trader’s Behavior
The pattern occurs in a bullish market, with the first day’s white candlestick further supporting the bullish sentiment. On the second day, an Inverted Hammer appears, with the market opening at or near its low. Prices then change direction and a rally occurs. However, the bulls fail to sustain the rally throughout the rest of the day, and prices ultimately close at or near the day’s low. This situation is likely to cause concern for bulls holding profitable positions.
Sell/Stop-Loss Levels
The confirmation level is defined by the low of the Inverted Hammer’s body. For confirmation, prices should fall below this level.
The stop-loss level is determined by the last high. If, following the bearish signal, prices rise instead of falling and either close or make two consecutive daily highs above the stop-loss level, without detecting any bullish pattern, the stop-loss is triggered.