Inverted Hammer and Shooting Star Candlesticks

Inverted hammer candles and shooting star candle-sticks look similar. These candles have a long line above and a small body at the bottom. Their colour does not matter. What matters is where these candle-sticks appear, either at the top of a rising market trend (shooting star) or at the bottom of a falling market trend (inverted hammer).

The difference is that the inverted hammer means prices might go up, but a shooting star means prices might go down.

Upwards Trend Reversal - Shooting Star CandlesDownwards Trend Reversal - Inverted Hammer Candles

Inverted Hammer and Shooting Star Japanese Candlesticks

Inverted Hammer Japanese Candle

The Inverted Hammer candlestick represents a positive (bullish) reversal pattern. It typically manifests at the lower extremities of a BTCUSD downtrend. The formation of an inverted hammer at a declining trend's nadir signals a potential shift back towards an upward trend in the Bitcoin price.

Inverted Hammer Candle Pattern - Bitcoin Trading

Analysis of the Inverted Hammer Bitcoin Trading Candle

When a buy signal is made using the inverted hammer candle, it is sure when another candle is made, and this new candle closes higher than the neck line, which is where the candlestick opens on the left side of the hammer candle, as shown above. The neck-line here acts as a level of resistance.

If the candle formed next to the hammer candle doesn't 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 candle that closes above the neck line is formed is when this bullish reversal pattern is confirmed.

For a previously established buy trade, stop loss orders should be positioned a small distance beneath the lowest price recorded in the most recent low point.

The Inverted Hammer candlestick pattern gets its name from the appearance suggesting the price is persistently testing a lower boundary.

Shooting Star Japanese Candlestick

The Shooting Star is a bearish reversal pattern in candles. It appears at the peak of an uptrend. This candle forms when Bitcoin opens near its low, shoots up, then drops back to close near the open.

Shooting Star Candle Pattern - Bitcoin Trading

Technical Analysis of the Shooting Star Candle

A sell signal made by using the shooting star candle pattern is confirmed when a new candle closes under the neckline: this neckline is where the candle opens on the left side of the shooting star candle, as shown in the picture above. The neck line here acts as a support level. Stop-loss orders for the sell trade deals opened with this setup should be a few pips above the highest price recently.

The shooting star candle gets its name from topping an uptrend in BTC USD crypto. It looks like a star in the sky, hence the label.

Learn More Topics & Courses:

• How Can You Analyze/Interpret a New BTCUSD Order in MT4 iPad App?
• Learn how to access your MetaTrader 4 BTCUSD account effectively.
• Drawing Fibonacci Extension Trading Levels in Upwards BTCUSD Chart Trend & Downwards BTCUSD Chart Trend
• Setting Exit Signals and Stop Loss Accuracy Levels
• How to Tell if the Market is Trending