This pattern consists of a white body followed by an Inverted Hammer that is characterized by a long upper shadow and a small body. It is similar in shape to the Bullish Inverted Hammer pattern but unlike it, the Shooting Star appears in an uptrend and signals a bearish reversal.
Recognition Criteria
1. The market is characterized by a prevailing uptrend. 2. The first day of the pattern is a white candlestick. 3. On the second day, a small body at the lower end of the trading range is observed. Color of this body is not important. 4. The upper shadow of this second candlestick should be at least twice as long as the body. 5. There is (almost) no lower shadow.
Pattern Requirements and Flexibility
The body of the Inverted Hammer should be small. The upper shadow must be at least twice as long as the body but not shorter than an average candlestick length. It is desired that there is no or a very tiny lower shadow. The top of the Inverted Hammer’s body should be higher than the preceding candlestick’s body.
Trader’s Behavior
The pattern occurs in a bullish background and the white candlestick that appears on the first day further supports the bullishness. On the second day, in which an Inverted Hammer is seen, market opens at or near its low. Then prices change direction and we see a rally. However, the bulls do not succeed in sustaining the rally during the rest of the day and prices finally close either at or near the low of the day. Certainly, this will cause some concern to any bulls holding profitable positions.
Sell/Stop Loss Levels
The confirmation level is defined as the low of the Inverted Hammer’s body. Prices should cross below this level for confirmation.
The stop loss level is defined as the last high. Following the bearish signal, if prices go up instead of going down, and close or make two consecutive daily highs above the stop loss level, while no bullish pattern is detected, then the stop loss is triggered.
Always take caution when a long upper wick forms after a big run.......the long upper wick on Friday's candle shows high of day(HOD) profit taking........Accum/Dist spiked down on Friday as well.......when Accum/Dist spikes down on an up day it is called bearish divergence and shows profit taking...........Friday's candle formed completely above the Upper Bollinger Band @ 0.0222......this signals the move is unsustainable.......you'll find the candles always work their way back into the Bollinger Bands........the upper BB is the 1st support level on a pullback........MA(7) @ 0.0165 is the 2nd support level......MA(10) @ 0.0143 is the 3rd.......as long as PBHG continues trading above MA(20)/Middle Bollinger Band @ 0.0121 the uptrend should continue..........$$$
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