Inverted Hammer and Shooting Star Candlestick Patterns

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Inverted Hammer and Shooting Star Candles

Both Inverted Hammer and Shooting Star have the same shape as both candlesticks have long upper wicks and small real bodies. The upper wick should be at least 2 times longer than the body. There should be no lower wick, or at least a very small lower wick. The color of the body is not important, although a white body has slightly more bullish implications and a red / black body has slightly more bearish implications. Inverted Hammer and Shooting Star are reversal patterns which comprised of one candle only. Whether a pattern is bearish or bullish reversal, it depends on whether it is formed at the end of a downtrend (Inverted Hammer) or an uptrend (Shooting Star).

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THE SHOOTING STAR

A shooting star is a type of candlestick formation that results when a security’s price, at some point during the day, advances well above the opening price but closes lower than the opening price. For a candlestick to be considered a shooting star, the formation must be on an upward or bullish trend, and the distance between the highest price for the day and the opening price must be more than twice as large as the shooting star’s body. The distance between the lowest price for the day and the closing price must be very small or nonexistent.

Criteria
* The upper wick should be at least two times the length of the body.
* The real body is at the lower end of the trading range and while the color of the body is not important, a black or red body should have slightly more bearish implications.
* There should be no lower wick or a very small lower wick.
* A black or red candle on the following day is needed to confirm the shooting star candlestick did occur.
* A gap down with a lower close is an even better confirmation that it occurred.
Signal Enhancements
* The longer the upper wick is the higher the potential is for a reversal to occur.
* If on the day after this signal occurs, the price opens up lower than the previous day’s close, then the signal has an even stronger confirmation.
* The chance that a blow-off day has occurred is increased if there is large volume on the shooting star day, although the large volume in not a necessity.
Pattern Psychology
After a strong up-trend has been in effect the atmosphere is bullish. The price open and trades higher and the bulls are in control. Before the end of the day however, the bears step in and take the price back down to the lower end of the trading range. This creates a small body for the day and could indicate that the bulls still have control. The long upper wick however, represents that sellers started to step in at these levels even though the bulls may have been able to keep the price positive by the end of the day. A lower open or a black or red candle the following day will reinforce the face that selling is occurring.[/vc_column_text][vc_raw_html]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[/vc_raw_html][/vc_column][/vc_row][vc_row][vc_column][vc_column_text css_animation=”fadeInDown”]

THE INVERTED HAMMER

The inverted hammer is easily identified by a small body with a wick at least two times greater than the body. It is found at the bottom of a downtrend and it indicates that the bulls are stepping in however selling is still occurring. The color of the small body is not important but a white or green body has more bullish implications than a black or red body. The following day requires a positive day in order to confirm that the inverted hammer signal has occurred.

Criteria
* The upper wick should be at least two times the length of the body.
* The real body is at the lower end of the trading range and the color of the body is not important however, a white or green body has slightly more bullish implications.
* There should be no lower wick or a very small lower wick.
Signal Enhancements
* The longer the upper wick the higher the potential for a reversal to occur.
* If on the day after this signal occurs, the price opens up higher than the previous day’s close, then the signal has even stronger confirmation.
* The chances that a blow-off day occurred are increased if there is large volume on the day of the inverted hammer signal.
Pattern Psychology
After a downtrend has been in effect the atmosphere is bearish but the price opens and begins to trade higher. The bulls have stepped in however they cannot maintain their strength and the existing sellers know the price back down to the lower end of the trading range. The bears are still in control but on the following day the bulls step in and take the price back up without any major resistance from the bears. If the price stays strong after the inverted hammer day then the signal is confirmed..[/vc_column_text][vc_raw_html]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[/vc_raw_html][/vc_column][/vc_row]

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