As promised... I am back with the next twin pattern - Inverted Hammer and Shooting Star.
As you can see, this pattern is basically Hammer and Hanging Man turned upside down. It has a small body which indicates close near to open and very small or non-existent lower horn. It's upper leg has to be at least twice the size of the body to meet the definition of Inverted Hammer or Shooting Star.
It indicates that though the price opened lower, it increased a lot as the day progressed but turning back again and close price is very close to open price (slightly lower or higher).
Inverted Hammer appears in a downtrend and it usually signifies the end of the current trend. In both these patterns; longer the upper shadow, better it is.
Shooting Star; similar to Hanging Man appears during the uptrend and it usually signals an impending end to the trend. Shooting Star is also quite similar in look to the notorious Gravestone Doji. However in case of Gravestone Doji, the opening and closing price are almost the same... meaning the body of the candlestick is not there and it is usually a stronger bearish reversal pattern than the Shooting Star. Gravestone Doji appearing in an uptrend signals bearish reversal and if appearing in an downtrend, it signals bullish reversal. It is all about Context as I said in the previous post. Meanwhile, see the example for Shooting Star below.
Next post will be a lot less confusing and it will be a pattern which is simple, does not have any twin sibling and extremely easy to identify. Wanted to write it today itself but have been called to office... someone onsite sneezed and I have to catch the cold. Will try to write it tonight and tomorrow tops.
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