If you trade crypto for a long time, you've probably encountered a situation where the price soars upward and then suddenly drops. Often, before such a reversal, an interesting candlestick pattern appears, called a shooting star. This is one of the most reliable signals in technical analysis, indicating that the uptrend may be coming to an end.

A shooting star looks quite distinctive: a small body at the bottom, with a long upper wick that accounts for more than two-thirds of the entire candle height. This shows that buyers initially pushed the price higher, but sellers overtook them and nearly brought the quote back to the opening level. The lower wick is almost absent or minimal. This pattern specifically indicates that momentum is shifting from bulls to bears.

In trading, this pattern is typically spotted at the peaks of an upward movement, especially when the price approaches resistance levels or previous highs. The longer the uptrend lasted, the higher the probability that a full reversal will follow a shooting star. Trading volume during the formation of this pattern also matters — if it’s high, the signal becomes much more reliable.

How to practically use this information? The first rule is not to rush. After the pattern forms, wait until the next candle closes below the closing level of the shooting star. Only then can you open a short position. Place your stop-loss above the pattern’s high to protect against false signals. The take-profit can logically be set at the nearest support level.

Many traders combine the shooting star with other indicators like RSI or MACD. If they also show oversold conditions or weakness, the signal becomes even more convincing. For example, if RSI is above 70 and a shooting star appears simultaneously, the likelihood of a reversal significantly increases.

Let’s take a specific example: an asset has been rising for a long time, reaches a resistance level, and a shooting star forms there. The next candle closes lower. You open a short position, set your stop above the pattern’s high, and target the nearest support for profit. That’s how classic trading with this pattern looks. The main thing is not to ignore the context and always seek confirmation before entering a trade.