Patterns/ One candle

One candle 6 min read

Shooting star

A small body at the bottom of the range with a long spike above it, after an advance. It records a period in which price reached high and could not hold any of it. Common, frequently meaningless, and occasionally the clearest thing on the chart.

What the shape is

A shooting star is a hammer turned upside down and moved to the other end of a move. Small body near the low of the range, long upper wick, little or nothing below, appearing after an advance.

The reading is symmetrical too. During the period, price pushed well above where it opened and then gave all of it back before the close. The spike is a record of prices that were reached and not sustained.

If it appears after a decline rather than an advance it is called an inverted hammer and is read the opposite way, which is the same awkward fact that applies to hammers and hanging men: the shape is identical, the name and the meaning come from where it sits.

When it means something

A spike into a level that heldIllustrative
Six advancing candles, then one whose spike clears the high of the entire advance and whose close lands back below it. Everything bought in that upper range was underwater by the close. The periods afterwards never trade back up there — which is what turns the spike from an event into a boundary.

The useful detail is not the spike itself but what it creates: a group of participants who bought high and are now holding a loss. That is a real, identifiable supply of people who would like to get out at breakeven, and it is why the area a spike reaches into often turns price away a second time.

The same shape, meaning nothing

The same spike, inside a trend that kept goingIllustrative
Same candle, placed in the middle of a strong advance rather than at the end of one. Price was above the spike's high within a few periods, and anyone who read the candle as a top was short into a market that kept climbing.

This is the more dangerous of the two failures, because acting on a shooting star means positioning against a trend that is currently working. Being wrong about a hammer means missing a bounce. Being wrong about a shooting star means standing in front of something moving.

Telling them apart

  • Did the spike clear something, or just extend? A spike through the high of the move, closing back below it, leaves a visible line. A spike that simply extends an advance leaves nothing behind.
  • Is the trend mature or young? Early trends absorb these constantly.
  • Was the high taken out afterwards? If price closes above the spike's high, the pattern has been answered and the answer is no.
  • How much volume was in the spike? A large upper wick on heavy volume means a lot of stock changed hands up there and the buyers are now offside. On light volume, almost nobody was involved.
The honest summary

A shooting star describes one period in which high prices were rejected. Trends are full of them. It becomes worth something when the spike reaches a level that already mattered and the high is then left alone — and both of those are facts about the chart, not about the candle.

Terms used

Shooting star
A small body near the low of the range with a long upper wick, after an advance.
Inverted hammer
The same shape after a decline, read the opposite way.
Supply
Participants who would sell at a given price — often people who bought there and want out.
Rejection
Price reaching a price area and closing back out of it.

Patterns are the easy half

Reading the chart underneath them is the part that decides whether any of this is useful. The Charts track works through levels, volume, trend and timeframes from the beginning.

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