In this video we're taking a look an inverted hammer in shooting star patterns.
This is one of my favorite candlestick patterns because it is easy to understand.
It has a small body or perhaps even no body an unchanged open a close if you will.
It normally has.
It normally has a little bit of a stub underneath but it doesn't have to.
We can not break down at all.
And then you get the long wick to the upside and the difference between a shooting star and an inverted
Hammer is simply where it plays.
If it's at the top of an uptrend then it's a shooting star.
It's supposed to be a star streaking across the night sky falling to earth.
So of course it's a bearish sign it's at the bottom of a downtrend it's an inverted hammer because well
it looks like a hammer but upside down.
Think about what these candlesticks mean.
Remember it's all about psychology of candlesticks it's what tells us what's going on.
So you know you have your colored in Candlestick and it doesn't matter the color.
Well how did this day play out you can see that the sellers came in but the buyers came in in a strong
move to the upside but eventually failed.
So think about all of the people that are trapped in this trade along this week.
They're in trouble if price goes against them.
So at the top of a Down are at the top of a uptrend you can see that we have rallied and then failed
to confirm the rally.
And once we break down below the bottom of the stick everybody here is losing.
So of course they have to turn around and sell their stock to close out their position so it becomes
a bit self-fulfilling.
You know if you're trading in a day that looks like this and you know so you buy here and things look
really good for most of the day and suddenly you're losing money in the next day you wake up and you're
losing money even even a quicker manner.
You're going to get upset and you're going to get out of the market so then tell the Shooting Star works.
Now the inverted hammer kind of the same thing but ironically the exact opposite.
And what I mean by that is you know same candlestick pattern.
But it's at the bottom of a downtrend.
So what you're seeing here is you know sellers are coming in and they're pushing prices lower.
Well what happens if you get in this candlestick.
You know some time during this day and you know it goes against you a little bit but you close out the
day and you feel pretty good.
You think OK find the downtrend continuing you know what does this mean.
Well this can mean a lot of different things if it breaks down below the bottom.
It's a simple continuation.
You can see that the buyers had trying to push prices higher but failed.
So that is what you would expect.
So this day being in the middle of a move lower might look something like that.
And then we drift even further.
OK.
That's fine that's great.
But what happens if you have this day.
You you start shorting them somewhere around here and it goes against you lower but you're in profit.
Well what happens at the next day looks something like this.
This is a positive candlestick.
Well you got a problem because not only are you losing money but everybody who shorted that day or the
hour whatever it is is now losing money as well.
And that's a breach of major resistance.
That's an inverted hammer.
So think of it this way in a sense these are basically dodges because what you're waiting for is a break
in one direction or the other of this massive move.
If we break down it shows bearish pressure.
Well if you're in a downtrend that's fine but if you're an upturn that's a problem.
If we break above there it shows bullish pressure
and remember you know failed candlesticks can be a signal in and of itself.
You know at this point really what you're paying attention to is resistance and support their support
underneath.
There is resistance above and if the support gets broken and that's bearish the resistance gets broken.
That's bullish.
That's really how you need to look at this.
Just think about the psychology.
Think about what the line graph looks like for that our day five minutes whatever.
Now obviously on a higher timeframes these candlesticks mean more and they also mean more if accompanied
by a support and resistance level that matters on the chart.
So let's take a look at a couple of examples.
Right here we had a strong labour hire.
We formed a shooting star broke below it and you can see that was the beginning of a move lower.
And speaking of failed candlesticks you can see that this hammer caused a little bit of a rally.
But once you break down below that hammer that's a very negative sign.
That's a broken candlestick.
That's another broken candlestick so you can see that we just came back to fill the gap.
Now these are one our candlesticks but this would be the same daily five minutes doesn't matter.
Here's another shooting star that almost got broken to the upside but it didn't.
So you had a shooting star.
First sign of trouble then this massive bear scandal.
Another sign of trouble.
And we turn things around now as I record this the Friday session formed on the early chart an inverted
hammer.
And we have broken above it.
That's a pretty bullish sign that shows a perhaps the downtrend over the last couple of days is ending.
Buyers are stepping in and more importantly short sellers are covering I cannot stress this enough.
You want to trade with the trend but you also want to trade it's important resistance and you want to
think about what the players involved in the market are experiencing because that's ultimately what
drives the market.
Here's a candlestick that is interesting because it's at the bottom of a downtrend.
It's not at the very bottom where you really want to see it.
But once you gap above this this attempt to push this market down you can see that we went much higher
and why won't because everybody who shorted in that candlestick is losing money.
Think about people that are trapped and take advantage of it.
That's really what trading is because you need that momentum.
They've got to come in and they've got to panic and get out of their position and push it in your favor
until as you can see shooting stars you want at extreme highs or lows.
They do happen in the middle but they don't matter as much.
Obviously the more extended the market gets the better a shooting star is.
So let's go ahead and take a look at the daily chart.
There you go.
So here's a nice move higher.
Shooting Star preceded by hammer we broke through hammer that's a failed stick.
That's a proven stick and we work down somewhat significantly there for a few weeks.
And you can see that as time goes by the shooting star did fire off a signal shooting star here after
a nice bounce from a hammer right ad previous support.
Excellent cell signal shooting star here at a Gap which should offer resistance excellent cell signal.
This shooting star at this previous support and resistance line again at two forty five or so.
You can see it repeats itself on and on and on.
Pay attention to these candlesticks.
They matter they matter a lot so with your top down analysis you recognize that there is an inverted
hammer there that has been broken two days in a row.
But before that we formed a hammer.
Let's go back to the hourly chart you can see that this inverted hammer has been broken to the upside.
So let's go back to the hourly chart now that we have this inverted hammer here.
It looks like the buyers are really starting to demand a lot here around 244.
So this move is starting to make sense.
It probably has legs up to to twenty nine or two 30 or so.
It's not a guaranteed move but it certainly shows that there's resiliency there.
That's the type of top down trading you need to do to be a resilient and successful day trader.