# Shooting Star: What It Means in Stock Trading, With an Example

![Shooting Star](https://www.investopedia.com/thmb/6kcfA9KFPYQ4Za1_wnNM-UekkSA=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Term-Definitions_shootingstar-f1bfe827e17442b28f465928a5bc9a43.jpg)

*— Investopedia / Jessica Olah*

> **Definition**
>
> A shooting star is a candlestick that signals a potential bearish reversal. It is characterized by a small real body near the lower end of the candlestick, an upper shadow that is at least twice the size of the body, and little or no lower shadow.

In the markets, bulls and bears are constantly at war—and knowing when one might be on the verge of wresting control from the other can be a valuable skill.

A shooting star is a candlestick that indicates the bears might be taking control, at least in the short term. It's pretty easy to recognize: It has a small real body at the lower end, a long upper shadow, and little or no lower shadow. This structure says that buyers initially pushed the price significantly higher, but strong [resistance](https://www.investopedia.com/terms/r/resistance.asp) from sellers, or the exhaustion of buying power, forced the price back down to a close near the open, indicating a loss of bullish momentum.  

### Key Takeaways

*   The shooting star is a candlestick one-day pattern, indicating a potential bearish reversal.
*   It is characterized by a small body at the lower end and a long upper shadow.
*   The pattern is an indicator, not a guarantee, of a bearish trend reversal.
*   Confirmation and volume analysis are crucial to validating the pattern.
*   Common mistakes include trading solely on the candlestick signal without confirmation.

## Understanding the Shooting Star Pattern

The shooting star is seen as an early warning that the prior bullish momentum is fading. The pattern shows bulls losing a short-term battle to the bears. There are a number of characteristics that confirm the existence of a shooting star candlestick:

*   It comes after a strong uptrend
*   It occurs at or near a recent high
*   The upper tail, or shadow, is at least twice as long as the body
*   The lower shadow is non-existent or very short, signaling a close near the low of the day
*   The candlestick body is very short but not nonexistent. It's small body shows little difference in the opening and closing prices

The shooting star signal is considered even stronger if:

*   There is no lower shadow at all
*   The closing price is below the opening price

Note that the existence of a shooting star candlestick doesn't guarantee a reversal. Traders should seek additional confirmation.  

### Confirming the Shooting Star Pattern

Traders can confirm the shooting star pattern in a number of ways. Signs of confirmation can include:

*   Other candlesticks, such as a strong bearish bar in the following period
*   The shooting star occurred at a previous resistance level, particularly a major Fibonacci level
*   A downturn from an overbought level or a crossover in the [Relative Strength Index](https://www.investopedia.com/articles/active-trading/042114/overbought-or-oversold-use-relative-strength-index-find-out) (RSI), [Moving Average Convergence Divergence](https://www.investopedia.com/terms/m/macd.asp) (MACD), or [stochastic oscillator](https://www.investopedia.com/terms/s/stochasticoscillator)
*   [Volume analysis](https://www.investopedia.com/terms/v/volume-analysis.asp) to gauge underlying buying and selling pressure

These signals can help a trader judge whether the shooting star is part of a genuine reversal pattern or just a one-off event. Perhaps the most reliable is a strong bearish follow-through candle, ideally closing below the shooting star's low. On the other hand, a weak confirmation candle, such as a [doji](https://www.investopedia.com/terms/d/doji.asp), may indicate hesitation, reducing the strength of the signal.

High volume on the day that the shooting star forms and a bearish confirmation candle the next day, suggests strong selling pressure, reinforcing the likelihood of a trend reversal. Conversely, low volume weakens the signal, increasing the chances of a failed setup. Furthermore, traders also look for negative divergence, where prices are rising but volume is weak.

## How to Trade a Shooting Star Pattern

Imagine a crude oil futures position trader is looking to take a short position after a rally such as one shown in the weekly chart below. Using the shooting star pattern, this is how the trader might play it:

![Shooting Star Pattern II - Crude Oil Futures](https://www.investopedia.com/thmb/QiHCGBsrxBe1GLBifRi9Lhjd5C8=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/SS_2-7dd3bf9845924105ac886ca1d6b84586.jpg)

*Shooting Star Pattern II - Crude Oil Futures. — Tradingview*

**Step 1: Recognizing the Shooting Star**

After a 15% rally over three months, the trader is looking for an opportunity to enter a short position in the event of a reversal. A shooting star appears with the high of the upper tail just above $80, near a previous resistance area.

**Step 2: Validating the Bearish Setup**

Once the shooting star is confirmed the bearish pattern needs to be validated. The fact that it formed near a level where the last reversal occurred is one signal. Additionally, the [stochastic oscillator](https://www.investopedia.com/terms/s/stochasticoscillator.asp)'s %K line has turned down from overbought and a bearish crossover appears imminent—clear evidence in favor of a reversal.

The following week, the market closes below the shooting star's low, with a bearish candlestick, and the stochastic oscillator completes the bearish crossover, together offering strong confirmation.

The trader may also use volume analysis to confirm the pattern.  

**Step 3: Initiating a Short Position**

A more aggressive trader might enter a short position once the market moves below the shooting star's low, given that the shooting star formed near a previous resistance level and the stochastic oscillator has turned down from overbought. They would want to set a relatively tight stop-loss order.

A less aggressive trader might enter once the market _closes_ below the shooting star's low, at the end of the week, with confirmation from the bearish candlestick and a stochastic crossover. This trader also enters a stop-loss order—in this case, above the high of that week's bearish candlestick.

Both traders would set a target price, keeping in mind that shooting stars can signal both short- and intermediate-term reversals.  

**Step 5: Early Exit Signals**

The trader monitors the position for any signs that the reversal is ending. These could include candlestick patterns—e.g., a hammer or inverted hammer, a bullish engulfing, or a morning star—bullish divergence in the RSI, or a bullish stochastic crossover.

With any of those signals, the trader may take some gains and wait for additional confirmation before exiting entirely, or simply exit the position entirely at that time.  

## Common Mistakes and Limitations

The shooting star pattern can be misinterpreted and misplayed. Some common pitfalls include:

*   **Too Much Weight**: The shooting star alone does not automatically signal a trend reversal.
*   **Neglecting Confirmation**: Trading a shooting star without additional confirmation is a common mistake.
*   **Ignoring Market Context**: In a solid uptrend, a candlestick formed by one day of trading may be the result of randomness.
*   **Overly Optimistic Targets**: Even if a shooting star pattern is confirmed, not every reversal that follows will be followed by a long downtrend—or even a downtrend at all. Some may be followed only by short pullbacks.  
    

## Shooting Star vs. Inverted Hammer

The shooting star and inverted hammer look alike but serve opposite functions in different market contexts. Both patterns have a small real body and a long upper shadow as well as little to no lower shadow.  

Shooting Star

*   Appears after an uptrend
    
*   Signals buyer exhaustion and a potential reversal downward
    
*   Buyers push price up but sellers overpower, closing near the low
    

Inverted Hammer

*   Appears after a downtrend
    
*   Signals seller exhaustion and potential reversal upward
    
*   Sellers push price down but buyers regain control, closing near the open
    

## The Bottom Line

Overall, the shooting star is a bearish candlestick that signals potential buyer exhaustion in an established uptrend. While it warns of a possible reversal, it does not mean the trend will reverse. The pattern requires confirmation through additional price action analysis.

Integrating volume analysis and technical indicators to confirm the pattern is essential for traders. Indeed, proper risk management improves the trading strategy. False signals are common in strong uptrends and low-volume markets, making it essential to assess the broader market.

> **Article Sources**
>
> 1.  Tradingview, "[Shooting Star-Bearish](https://www.tradingview.com/support/solutions/43000583789-shooting-star-bearish/)"
>     
> 2.  ChartSchool, "[Candlestick Bearish Reversal Patterns](https://chartschool.stockcharts.com/table-of-contents/chart-analysis/candlestick-charts/candlestick-bearish-reversal-patterns)"
>     
> 3.  Corporate Finance Institute. "[Shooting Star](https://corporatefinanceinstitute.com/resources/career-map/sell-side/capital-markets/shooting-star/)."