Shooting star and inverted hammer: reading the long upper wick

A shooting star and an inverted hammer look identical: a small body near the bottom of the candle and a long upper wick. At the top of a rally the candle is called a shooting star and is read as a sign that buyers were rejected. At the bottom of a decline it is called an inverted hammer and is read, more cautiously, as a first sign of buying interest. Same shape, opposite stories, and neither story is reliable without what happens next.

The shape

• A small body in the lower part of the candle's range.
• A long upper wick, usually at least twice the body.
• Little or no lower wick.

During the period, price rose well above the open and then fell back to close near the low. The candle records an attempt to go higher that did not hold.

Shooting star: at the top

After a rise, especially into a resistance level, the shooting star reads naturally: buyers pushed into new highs, sellers met them there, and price closed near where it opened. The long wick marks the area where selling appeared. It is the mirror image of the hammer at support. The glossary has a short entry for the shooting star.

A bearish body (close below open) is sometimes treated as a little stronger, but location and confirmation carry most of the weight.

Inverted hammer: at the bottom

After a decline, the same shape is less intuitive. Buyers pushed price up during the candle, but sellers brought it back down. Why would that be bullish? The argument is that it is the first serious attempt to rise in a while, which shows that buying interest exists. Because the candle still closed near its low, the inverted hammer is considered weaker than a hammer and needs firm confirmation, typically a strong bullish candle closing above the inverted hammer's body or high.

A worked example

Shooting star. EUR/GBP on M15 climbs for five candles into 0.85800, a level where price turned down twice in the past two days. The sixth candle opens at 0.85770, rises to 0.85830, and falls back to close at 0.85760. Body: 1 pip. Upper wick: 7 pips. That is a shooting star at resistance.

The next candle decides. If it closes below the shooting star's low, the rejection is confirmed. If it pushes above 0.85830 and closes there, the level broke and the shooting star was a brief hesitation, a common outcome in strong trends.

Inverted hammer. Later the pair falls back to 0.85500, where it bounced last week. A candle opens at 0.85510, rises to 0.85560 and closes at 0.85505. On its own, that candle closed lower than it opened, which hardly sounds bullish. Only if the following candle closes clearly above 0.85560 does the inverted hammer start to look like the beginning of a bounce. If the next candle breaks below 0.85500 instead, the support failed.

Why context matters more than shape

The same candle appears constantly in sideways markets, where it signals nothing in particular. What turns a long upper wick into information is:

• a preceding move in one direction,
• a clear level at the point where the candle forms,
• and a next candle that agrees.

Missing any one of these makes the pattern much weaker. Two shooting stars at the same high, one after another, may form tweezer tops, which some traders consider stronger evidence.

How the patterns fail

• In strong trends, shooting stars appear and are immediately overrun.
• A news spike can create a long wick in seconds that has nothing to do with the level.
• An inverted hammer without confirmation is often just a pause in a decline.
• On a candle that has not closed yet, a long wick can still shrink or vanish.

Short expiries and OTC

On very low timeframes such as S15 or M1, long upper wicks form all the time from tick noise. For short expiries, many traders identify the pattern on M5 or M15 at a level that matters and use a lower timeframe only to watch the reaction. Confirmation on M15 takes another 15 minutes, which is often longer than the trade.

On Sky Trade's OTC instruments, prices are generated by Sky Trade's server and do not follow any real market. The model makes the next move unpredictable, so a long upper wick there tells you nothing about the following candle.

How to use it in the Sky Trade terminal

Read these patterns on the Candles chart type, not Heikin Ashi, which averages prices and changes wick shapes. Draw the resistance or support level with the horizontal level tool before the candle forms, so you are not fitting the level to the pattern afterwards.