Shooting Star Vs Inverted Hammer

What is a shooting star in the stock market?

A shooting star is a bearish candlestick pattern observed in technical analysis that typically signals a potential reversal at the top of an uptrend. It has a small real body near the day's low and a long upper shadow, indicating that prices opened, surged during the session, but then closed near the opening level. This pattern suggests that buying pressure was overcome by sellers by the close, indicating weakening bullish sentiment. Traders interpret this as a signal of potential trend reversal or selling opportunity, especially when it appears after a strong rally. However, confirmation with the next candle or volume analysis is important before making decisions. The shooting star is most effective on daily charts or longer time frames and becomes more reliable when combined with other indicators or resistance levels.

Characteristics of a shooting star

The shooting star candlestick has distinct characteristics that make it easy to identify on price charts. It has a small real body near the low of the day and a long upper shadow that is at least twice the size of the body. This shape indicates that the price opened and rose significantly during the session, but selling pressure drove it back down before the close. The small body shows indecision, while the long upper wick reflects failed attempts by buyers to sustain higher prices. The colour of the candle can be red or green, but a red candle usually strengthens the bearish signal. The pattern is more significant when it occurs after a strong uptrend, especially near a resistance level. It signals that momentum may be slowing and a bearish reversal could follow.

What is an inverted hammer?

An inverted hammer is a bullish reversal candlestick pattern that appears after a downtrend. It looks similar to a shooting star but appears in a different context. The inverted hammer features a small real body at the lower end of the candle and a long upper shadow, showing that buyers attempted to push prices higher during the session. However, they were met with selling pressure that brought the price back near the opening level. Despite the failed rally, the presence of buying activity indicates potential support and a possible change in market sentiment. Traders look for confirmation from the following candle, such as a strong bullish candle or a gap up, to validate the reversal signal. The inverted hammer is most useful when supported by other technical indicators or occurring near a support zone.

Characteristics of an inverted hammer

The inverted hammer has a small real body at the lower end of the trading range and a long upper shadow that is at least twice the size of the body. There is little to no lower shadow. This pattern appears after a downtrend and reflects that bulls attempted to take control during the session, although they could not hold the higher levels by the close. The long upper wick shows strong buying pressure, while the small body suggests indecision. Unlike the shooting star, which indicates bearish sentiment, the inverted hammer implies that a bullish reversal may be near. For higher accuracy, traders wait for confirmation in the form of a bullish candle following the pattern. It is also considered more reliable when it appears after a prolonged downtrend or near a recognised support level.

Difference between shooting star and inverted hammer

The shooting star and inverted hammer are visually similar candlestick patterns, but they serve opposite purposes and appear in different market contexts. A shooting star occurs after an uptrend and signals a potential bearish reversal, indicating that buyers lost control and sellers dominated by the close. It represents weakness in an ongoing rally.
In contrast, the inverted hammer appears after a downtrend and suggests a possible bullish reversal. It reflects buyer attempts to reverse the bearish momentum, even though the price closes near its opening level. The key distinction lies in their location on the chart—shooting stars appear at the top, while inverted hammers form at the bottom. Despite their similarities in structure, their interpretation depends on preceding trends, volume, and confirmation from subsequent price action or technical indicators.

Conclusion

Both the shooting star and inverted hammer are important candlestick patterns used in technical analysis to identify potential reversals. While the shooting star signals a bearish reversal after an uptrend, the inverted hammer indicates a possible bullish turnaround following a downtrend. Despite having similar shapes, their meaning and placement on the chart are critical for correct interpretation. These patterns are most effective when used in conjunction with other tools such as volume analysis, support-resistance levels, or momentum indicators. Traders should always wait for confirmation before acting on these signals, as relying solely on a single candlestick can lead to false predictions. When used correctly, both patterns can help traders anticipate market shifts and improve entry or exit timing in trending markets.