How to Make Money Trading with Candlestick Charts

Shooting Star signal
It is formed after a stock has been in a

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defined up trend. The formation looks like a
shooting star with its tail pointing to the sky,
hence the name.

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Criteria
The conditions for the Shooting Star signal to
be valid are:
The stock must have been in a definite up
trend before this signal occurs. This can
be visually verified on the chart.
The upper shadow must be at least twice
the size of the body.
The day after the Shooting Star signal
should witness continued selling and a
lower close.
There should be no lower shadow or
very small lower shadow.

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Why the Reversal Works
Consider a stock in an up trend. When do
most novice investors tend to buy? Right at
the top! After a stock has gone up, they
convince themselves that it will keep going
up. Exuberance sets in. One day, as the stock
opens higher or relatively flat, the investors
jump in and create a huge white candle
during the day. Smart money starts selling
noticing the greed in the stock. The selling
brings the price down, creating a long upper
shadow. If the stock closes lower the day
after the Shooting Star, the trend is said to be
reversed.
The following conditions make the reversal
of the up trend more convincing:

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There is a spike in volume on the day of
the signal.
There is a gap up from the previous close
on the day of the signal, indicating
exuberant buying at the top.
Stochastics are in overbought condition.
The longer the upper shadow, the better.
The colour of the Shooting Star body
does not matter, but a black body would
be a stronger confirmation.
Figure 5.7
 shows a Shooting Star formation
in the Tata Teleservices chart.

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Figure 5.7: