Shooting Star and Inverted Hammer: Identification, Variants, and Trading Strategies

What Are the Shooting Star and the Inverted Hammer?

The shooting star and the inverted hammer are single-candle patterns from Japanese candlestick analysis with the same shape: a small body at the lower end of the range, a long upper wick, and hardly any lower wick. Which of the two you are looking at depends only on the trend before the candle.

The shooting star owes its name to its appearance: a small head at the bottom and a long tail above it. Steve Nison described both patterns for Western readers in Japanese Candlestick Charting Techniques (1991); he sees the shooting star more as a warning of a top than as a major reversal formation.

Among candlestick patterns, the two are the counterpart to the hammer and the hanging man: there the long wick points down, here it points up.

How Do You Identify a Shooting Star?

You can identify a shooting star or an inverted hammer by the proportions of the candle and by where it sits on the chart. What matters is the combination of a small body, a long upper wick, and a clear trend beforehand; a candle of this shape in the middle of a sideways phase does not count.

• The body is small and sits in the lower part of the candle's range; according to Nison, its color does not matter.
• The upper wick is at least twice as long as the body.
• There is no lower wick, or only a very short one.
• A recognizable trend runs before the candle: an uptrend for the shooting star, a downtrend for the inverted hammer.
• Both candles need confirmation from the next candle; for the inverted hammer it is especially important.

What Lies Behind the Shooting Star?

Behind the long upper wick is a change of mood within a single period: after the open, buyers push the price well higher, but by the close almost all of that gain is gone. What this means depends on which side was in control before the candle.

With the shooting star, this rejection comes after a rise. The market still reaches a new high but cannot hold it: anyone who bought high up in the wick is already at a loss by the close. If the next candle also closes below the low, these late buyers come under pressure, and their selling can add to the decline.

With the inverted hammer, the reading is less obvious, because here too the price closes near the low. After a downtrend, however, the wick shows that buyers are trying to lift the price for the first time. If the price rises above the body in the next candle, everyone who was still selling at the close of the pattern candle is at a loss; only this follow-through turns the candle into a bullish hint.

What Types Exist?

The two patterns differ not in shape but in the trend before them. Added to this are a textbook detail, the price gap, and the distinction from the hammer, whose proportions are exactly reversed. The table at the end of the section summarizes everything.

Shooting Star

The shooting star forms after a rise, and its upper wick marks the highest high of the move. It warns that buyers may not be able to hold the new level. It is confirmed when the next candle closes below its low; until then, it remains a warning.

Inverted Hammer

The inverted hammer forms after a decline, and its body sits at the level of the lowest closing prices. Nison explicitly calls for bullish confirmation from the next candle here, such as a close above the body. A more cautious approach is to wait for a close above the high of the long wick, because only there is every buyer from this candle in profit.

The Textbook Price Gap

In the textbook, the shooting star ideally opens with a gap above the body of the previous candle; for the inverted hammer, a corresponding gap downward is described. Nison himself does not consider the gap essential for the shooting star. In forex and crypto trading, a candle usually opens at the previous close; the gap is therefore usually missing there, which does not invalidate the shape.

Distinction from the Hammer

If the body is at the top and the long wick at the bottom, it is neither of these candles but a hammer or hanging man; those candles are explained on the page about the hammer and hanging man. Despite the similar name, the hammer closes near the high and the inverted hammer near the low, so the move within the candle runs exactly the other way around.

When Does a Shooting Star Confirm, and When Does It Not?

A shooting star is confirmed as soon as the next candle closes below its low. With the inverted hammer, a close above the body is the first hint and a close above the high of the wick the clearer confirmation. If the price instead closes beyond the other end of the candle, the pattern is invalidated.

For the shooting star, this means that a close above the high of the wick shows that buyers have won back the rejected level after all. For the inverted hammer, a close below the low invalidates the candle: the attempt upward has fizzled out, and the downtrend continues. That is exactly what the following chart shows.

In the false-signal chart, the price falls in several waves. An inverted hammer then forms: it opens at 103.73, rises to 105.96, and closes at 104.01; the upper wick is 1.95 points long, the body only 0.28 points. The very next candle closes at 103.06, below its low of 103.68. The attempt upward has failed and the downtrend continues: the last candle in the chart closes at 98.40.

Example of Entry, Stop, and Target

A planned trade with the shooting star ties the entry to the confirmation from the next candle and protects the position above the long wick. Since the upper wick marks the zone where buyers failed, its high provides a well-founded point for the stop; the last swing low serves as the target.

In the chart, the price rises in several waves. The pattern candle opens at 102.04, rises to 104.69, and closes at 101.70; its upper wick is 2.65 points long, the body only 0.34 points. A trader waits for the next candle: it closes at 100.47, below the pattern candle's low of 101.64, and the sale takes place at the close. The stop goes just above the high of the shooting star, at 104.79; the risk is 4.32 points. The target is the swing low at 92.76, where the uptrend began; the price reaches it after 13 candles, which is 7.71 points. This gives a risk/reward ratio of about 1:1.8. The long wick has its price: it makes the stop wide, and by the close of the confirmation candle, 4.22 points of the move from the high are already gone.

How Do You Use the Shooting Star and the Inverted Hammer Across Multiple Timeframes?

Looking at several timeframes shows whether the candle marks a turning point in the bigger picture or merely a pause in short-term noise. A shooting star on the lower chart carries more weight if its wick reaches into a zone on the higher chart and that chart is falling anyway.

If, for example, the price is falling on the 4h and 1d charts while it pulls back upward for a few hours on the 1h chart and forms a shooting star there, the candle points in the direction of the main move. If the same shooting star stands against a steep uptrend on the higher timeframes, the decline often stalls after a few candles. The same applies in reverse to the inverted hammer. FinScans shows the trend across the eight timeframes on the signal page and in the cockpit.

How Do News and Scheduled Events Affect the Shooting Star and the Inverted Hammer?

Economic data and interest rate decisions can create long upper wicks within minutes that look like a shooting star but merely reflect the first reaction to a report. Before entering, you should therefore check whether the candle coincides with a scheduled event and whether the price has reversed that reaction by the close.

When an interest rate decision or a labor market report is due in the economic calendar, ranges often widen abruptly. A long upper wick shortly after such a release can come from a single price jump and then says little about the direction afterward. Anyone who also checks the news situation in the cockpit can see whether there is a report behind the wick or whether the rise was rejected by the ongoing market.

How Do You Use the Shooting Star and the Inverted Hammer in the Four Trading Styles?

Depending on the trading style and timeframe, a single candle with a long upper wick means something different in the trading plan. On short intervals, the priority is filtering out random moves; on higher timeframes, the question is rather whether the wide stop above the wick still fits the target.

Shooting Star and Inverted Hammer in Scalping

In scalping on the 15m and 30m charts, candles with a long upper wick form often, for example when a short wave of buying is sold off immediately; many of them have no trend before them and therefore say little. Scalpers first check on the 1h or 2h chart whether there is a clear direction, and they look for places where the wick touches a session high or a known zone. A sale makes sense mainly when the next candle immediately closes below the low. At this level, the inverted hammer serves more as a reason to close existing short positions than as a reason to buy in its own right. The stop goes just above the wick and is often only a few points away, so spread and slippage carry a lot of weight. Trading focuses on the liquid London and New York sessions, because in the quiet Asian session even small orders can leave long wicks. The holding period is a few minutes to a few hours.

Shooting Star and Inverted Hammer in Day Trading

In day trading on the 1h and 2h charts, a shooting star often shows that a rise within the day was rejected at resistance, and positions are closed before the end of the trading day. To judge the higher-level direction, day traders consult the 4h or 8h chart. The candle carries the most meaning at the previous day's high. The entry comes after the close of the confirmation candle, and the stop goes just above the tip of the wick. If the wick is unusually long, the distance to the stop grows; at the same risk this calls for a smaller position size and can worsen the ratio to the day's target. An inverted hammer at the previous day's low usually becomes interesting only when the next candle closes above its high and enough room remains before the end of the trading day. If the candle forms only toward the end of the New York session, many day traders skip a new trade, because hardly any time remains for confirmation and target.

Shooting Star and Inverted Hammer in Swing Trading

In swing trading on the 4h and 8h charts, traders hold positions for days to a few weeks; a shooting star at the end of a rise lasting several days is a typical hint of a countermove here. The context comes from the 12h and 1d charts, which show the large trend sections and zones. An 8h candle covers a third of the day, so its long wick shows a broader rejection than on short charts. If the next candle confirms a shooting star at resistance on the higher chart, swing traders use this for an entry in the direction of the decline. With the inverted hammer, they usually wait for a close above the high of the wick and check whether the 1d chart supports the rise. A stop beyond the wick leaves room for normal swings within the day. Since positions run overnight and often over the weekend, swing traders allow for possible weekend gaps in currencies, while cryptocurrencies trade continuously. If the price moves in the desired direction, many trail the stop behind each new swing high or swing low.

Shooting Star and Inverted Hammer in Position Trading

In position trading on the 12h and 1d charts, trades last weeks to months; a shooting star or inverted hammer on the daily chart is a reason to review the situation here, but rarely a reason to enter on its own. There is no timeframe higher than 1d in FinScans; the context therefore comes from the 1d chart over several months. If the market forms a shooting star on the daily chart at an important zone after a rise lasting several weeks, that is a reason for existing long positions to trail the stop or take some profit. For new short positions, position traders usually wait for the close of the next daily candle and check whether interest rate policy and macro data support a change of trend. An inverted hammer after a long decline is accordingly an early hint that a bottom may be forming; on its own, it rarely justifies a purchase. Because the wick on the daily chart is long, stops sit far from the entry; weekend gaps and interest rate decisions are cushioned by a correspondingly smaller position size.

Shooting Star or Gravestone Doji?

Both candles have a long upper wick and hardly any lower wick, so on the chart they share the same basic message of a rejected move upward. The difference lies in the distance between the open and the close at the lower edge of the range.

A doji with a long upper wick, the gravestone doji, looks similar to a shooting star; with the doji, however, the open and close are at the same level, while the shooting star has a small body. After an uptrend, many traders read both candles in a similar way and in both cases wait for the next candle to close below the low.

What Mistakes Are Common with the Shooting Star and the Inverted Hammer?

Many failed trades come from traders looking only at the striking upper wick and ignoring the candle's surroundings. Without a prior trend, without confirmation, and without a look at the distance to the stop, the pattern loses its practical value.

• Confusing the two candles: the same shape means something different after a rise than after a decline; an inverted hammer is not a reason to sell.
• Trading without a prior trend: such a candle in the middle of a flat sideways move has no trend it could reverse.
• Buying the inverted hammer without confirmation: the price closes near the low and the downtrend is still intact for now; without a close above the body, there is no evidence of a turn.
• Ignoring zones: if a shooting star forms far from any resistance, there is no concrete reason why the market should turn right there.
• Not adjusting the position size: trading the wide stop above a long wick with the same size as a tight stop goes against sound risk management.

How Shooting Star Triggers Are Named in FinScans Signals

On the signal page, these triggers appear in the trigger table, each with an arrow: ▲ means FinScans counts the trigger on the bullish side, ▼ on the bearish side. There are two names:

• “Shooting Star” (▼): Small body at the bottom, long upper wick, hardly any lower wick; according to the textbook, at the end of an uptrend.
• “Inverted Hammer” (▲): The same shape; according to the textbook, at the end of a downtrend.

The names describe the textbook shape. Whether an uptrend (for the shooting star) or a downtrend (for the inverted hammer) really ran before the candle is not shown by the name; you check that on the chart. Without a preceding trend, the candle says little.

The signal page shows no class for candlestick patterns. Such a trigger rarely stands alone: FinScans combines it with the other triggers of the same signal into an overall direction. Whether it runs with or against the larger move is shown by the trend across the eight timeframes and the overall assessment.

The following block shows current data on these two triggers. The hit rate should always be read relative to the average: if it is above, the trigger has a statistical edge; if it is below, it is better used as a hint than as the sole reason to enter. The rates can vary considerably by trading style, because there is more noise on short timeframes. The distances to target and stop also play a role: a tight stop is hit more often than a wide one, a distant target less often than a near one.

What the Machine Reports, What You Check Yourself

On the signal page, these triggers appear for forex and crypto pairs; their name only states what shape the candle has. Whether the candle stands at a sensible place on the chart and offers a viable setup is something you decide yourself in hybrid trading.

• The machine reports “Shooting Star” or “Inverted Hammer”; you check on the chart whether a clear uptrend or downtrend actually ran before the candle.
• The signal page shows the trigger; you wait to see whether the next candle confirms the pattern with a close below the low (shooting star) or above the body or high (inverted hammer).
• The machine provides the trend across eight timeframes; you check whether the long upper wick is testing a prominent resistance (more on this on the page about support and resistance).
• The data block shows the hit rate so far; you check the economic calendar to see whether the long wick coincides with a scheduled event such as an interest rate decision.
• The signal page gives target and stop; you measure the length of the upper wick and work out whether a reasonable risk/reward ratio remains up to the next swing low or swing high, in line with your risk management.

Frequently asked questions

What Is the Difference Between a Shooting Star and an Inverted Hammer?

The shape is the same: a small body at the bottom, a long upper wick, hardly any lower wick. What matters is the trend beforehand. After an uptrend, the candle is called a shooting star and warns of a possible turn downward; after a downtrend, it is called an inverted hammer and points to a possible turn upward.

How Reliable Is a Shooting Star?

On its own, a shooting star is only a hint: it shows that higher prices were rejected in this candle. It says more at an important resistance, with confirmation from the next candle, and when the higher timeframes point in the same direction. The data block on this page shows the triggers' hit rate so far.

Why Is the Inverted Hammer Considered Bullish Even Though It Closes Near the Low?

The candle itself initially shows only a failed rise. It becomes bullish only through what follows: if the price rises above the body in the next candle, everyone who was still selling at the close of the pattern candle is at a loss, and their buying back can add to the rise.

What Role Does the Color of the Body Play?

According to Steve Nison, the color of the small body does not matter for either pattern, because what counts is the ratio between the long upper wick and the small body in the lower part of the range. Many traders still see a red body on a shooting star or a green body on an inverted hammer as a slight plus, because it points in the direction of the expected move.

Sources

• Nison, Steve: Japanese Candlestick Charting Techniques, New York Institute of Finance, 1991.
• Morris, Gregory L.: Candlestick Charting Explained, McGraw-Hill, 2006.
• Bulkowski, Thomas N.: Encyclopedia of Candlestick Charts, John Wiley & Sons, 2008.