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Hammer and shooting star patterns suggest trend reversals from "summary" of Japanese Candlestick Charting Techniques by Steve Nison
The Hammer and Shooting Star patterns are powerful signals that can indicate a potential trend reversal in the market. These patterns are characterized by a small body with a long lower shadow, resembling a hammer or a shooting star. The Hammer pattern forms after a downtrend and suggests that the selling pressure is starting to weaken. The long lower shadow indicates that sellers pushed the price lower during the session, but buyers were able to push it back up, closing near or above the open. This shows that buyers are stepping in to support the price, potentially signaling a reversal in the downtrend. On the other hand, the Shooting Star pattern appears after an uptrend and signifies that the buying pressure is starting to decrease. The long upper shadow indicates that buyers pushed the price higher during the session, but sellers were able to push it back down, closing near or below the open. This suggests that sellers are starting to take control, possibly leading to a reversal in the uptrend. These patterns are most effective when they are confirmed by other technical indicators or chart patterns. Traders should look for additional signs of a potential trend reversal, such as a bearish or bullish reversal pattern, a divergence in momentum indicators, or a break of key support or resistance levels. It is important for traders to wait for confirmation before making any trading decisions based on these patterns. A single candlestick pattern is not always enough to make a reliable prediction about the future direction of the market. By combining the Hammer and Shooting Star patterns with other technical analysis tools, traders can increase their chances of making successful trades in the market.
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