What it means
Both have a small body near the bottom of the range and an upper wick at least twice the body. After a rally it is a shooting star; after a decline it is an inverted hammer.
Why traders use it
A shooting star shows buyers pushed price up and were overwhelmed before the close. An inverted hammer after a decline shows buyers testing higher prices for the first time; it needs stronger confirmation.
Chart examples
Shooting star at the top of a rally
Inverted hammer after a decline
How to identify it objectively
- 1Upper wick ≥ 2× body.
- 2Little or no lower wick.
- 3Body in the lower third of the range.
- 4Name depends on the preceding move.
Bullish use
- 1Inverted hammer after a decline.
- 2Next candle closes above its body (better: above its high).
- 3Stop below its low.
Bearish use
- 1Shooting star after a rally, at resistance.
- 2Next candle closes below its low.
- 3Stop above its high.
What confirms it
- A close beyond the pattern in the expected direction.
- Location at a level or after a sweep of a high.
What invalidates it
- A close above a shooting star's high.
- A close below an inverted hammer's low.
How a hypothetical setup is built
Entry
On the confirmation close.
Stop
Beyond the long wick (shooting star) or the low (inverted hammer).
Target
The prior swing.
A hypothetical illustration of how the concept is turned into a plan, not a recommendation. Practise it on a paper account first.
Related concepts
- Candlestick PatternsHammer and Hanging Man
- Candlestick PatternsPin Bar
- Candlestick PatternsBullish and Bearish Engulfing
Historical testing
Not tested on The Tradeskill.
Limitations: when it fails
- Wide stops due to the long wick.
- Inverted hammers are weaker signals.
- Context matters more than shape.
Knowledge check
Pick an answer to see the explanation. Nothing is saved.