Shooting star candle

A shooting star is a candle with a small body at the bottom of its range and a long wick sticking up above it. The rule: the upper wick should be at least twice the body, and the lower wick either absent or very short.

Here's what happened inside it: buyers pushed price higher and tested new levels. Then sellers stepped in and took back almost the whole move. The close landed near the open and near the low. The higher prices were not accepted.

The name carries a location. A shooting star appears at the top of a rally. The same shape at the bottom of a decline is an inverted hammer and tells a different story. The general name for the shape, with no location attached, is an upper-wick pin bar. So the first question is always the same: where did the rejection happen?

Start by measuring. Say a one-hour EURUSD candle opens at 1.0920, runs up to 1.0948, dips to 1.0916 and closes at 1.0917. Body 3 pips, upper wick 28 pips, lower wick 1 pip. The upper wick is nine times the body and the lower wick is barely there. That's a shooting star.

Don't get hung up on the colour. A red body reads slightly stronger because the close finished below the open as well. A green shooting star is still a shooting star; the wick carries the information.

Then look at the location. Is there a clear rally before it? Did the wick test resistance, a previous high or the top of a range? A wick that pokes a few pips above a prior high and closes back below it tells you the stops there were taken and price was pushed back. A shooting star that meets a level says far more than one that forms on its own in the middle of the chart.

Wait for the next candle as confirmation. If it closes below the shooting star's low, 1.0916, sellers have taken over. For a trade, the stop goes a little above the tip of the wick. With the wick ending at 1.0948, the stop sits near 1.0951. Selling the close at 1.0917 means 34 pips of risk; that distance is your 1R.

Calling every upper-wick candle a shooting star. A candle with an upper wick in the middle of a rally, touching no level, is usually buyers catching their breath. The shape may be right but the place is wrong; no resistance is being defended.

Selling before the candle closes. You see a long upper wick halfway through an hourly candle, then price climbs back in the last minutes and the wick turns into a body. A shooting star only exists once the candle has closed.

Ignoring the stop distance. The candle's strength is its long wick, but that same wick pushes the stop far away. Entering a 34-pip stop with the size you'd use for 12 pips nearly triples your risk. If the distance is long, shrink the position. Don't pull the stop to the middle of the wick, because that isn't where the idea fails.

Inside a strong trend, one shooting star is often not enough. With the 4-hour chart still printing higher highs, a shooting star on the 15-minute may give you a short pullback at most. A rejection candle that appears before the bigger structure changes describes a pause more often than a reversal.

If the next candle closes above the wick's high, the shooting star is void. The rejected prices have been accepted after all, and the sell idea ends there.

Check the room below as well. If strong support sits just under the shooting star, there isn't much space to fall. A 34-pip stop against a first obstacle 20 pips away is under 1R before the trade starts. Keep news candles separate too; long wicks in those minutes are orders emptying out, not a level being rejected.