Shooting Star - single day pattern

The first rule for the shooting star formation is that on the day of the formation, the candle opens higher than the previous day's close. From there, the bulls must push prices substantially higher intraday. Then, at some point during the trading day, the bears must come out, and push prices much lower, closer to the opening of the day.

The shooting star has a long upper shadow with a small real body at the lower end of the candle. This pattern usually presents itself as a sign of a short term correction rather than a more potent reversal signal. The shooting star is basically telling us that the markets rally could not be sustained. The market opened at or near its lows, shot up much higher and then reversed to close near the open.

Ideally, the real body of the shooting star should gap away from the previous candles' real body. While it is not necessary, it adds confirmation to the validity of the impending reversal. When a shooting star forms near a resistance level, which also was created with a shooting star, a very powerful resistance level is created. The shooting star is a short term topping formation and any break above the high of this candle negates the ramifications of the formation.