Inverted Hammer and Shooting Star Candlesticks
Inverted hammer candlesticks and shooting star candlesticks look alike. These candlesticks have a long upper shadow and a short body at the bottom. Their color does not matter. What matters is the point where they appear whether at the top of a market trend (star) or the bottom of a market trend (hammer).
The difference between the two is that inverted hammer candlestick is a bullish reversal pattern while shooting star candlestick is a bearish reversal pattern.
Upward Trend Reversal - Shooting Star Candlesticks
Downward Trend Reversal - Inverted Hammer Candlesticks
Inverted Hammer and Shooting Star Japanese Candlesticks
Inverted Hammer Japanese Candlestick
The Inverted Hammer candlestick is a bullish reversal candlestick pattern. It occurs at the bottom of a Gold price downward trend.
Inverted hammer candlestick occurs at the bottom of a downtrend and indicates the possibility of reversal of the downward Gold price trend.
Inverted Hammer Candlestick Pattern
Technical Analysis of Inverted Hammer Candlestick
A buy signal generated using the inverted hammer candlestick pattern is confirmed when another candlestick is formed and this new candlestick closes above the neckline, this is the opening of the candlestick on the left side of this hammer candlestick as shown above. The neckline in this case is a resistance level.
If the candlestick formed next to the hammer candlestick does not close above the neck line, then as a trader you wait to see if the subsequent candlestick closes above the neck line. Only when a candlestick that closes above the neckline is formed is when this bullish reversal pattern is confirmed.
Stop orders for the buy trade that has been opened should be placed a few pips below the lowest price on the recent low.
An inverted hammer candlestick is named so because it signifies that the market price is hammering out a bottom.
Shooting Star Japanese Candlestick
The Shooting Star candlestick is a bearish reversal candlestick pattern. It occurs at the top of an upward trending market.
Shooting Star candlestick occurs at the top of an uptrend where the open price of Gold is the same as the low - meaning price opened at that point rallied up but was pushed back down to close near the same opening price.
Shooting Star Candlestick Pattern
Technical Analysis of Shooting Star Candlestick
A sell signal generated using the shooting star candlestick pattern is confirmed when a new candlestick closes below the neckline; this is the opening of the candlestick on the left side of the shooting star candlestick as shown on the example above. The neckline in this case is a support level.
Stop orders for the sell trades opened using this setup should be placed a few pips above the highest price on the recent high.
The Shooting Star candlestick is named so because it is formed at the top of an upward Gold market trend - this candlestick pattern resembles a shooting star up in the sky thus it name - shooting star.