Stars is a group of reversal patterns. Stars are isolated in a separate group thanks to their unique shape and strength of the signal.
The main condition for the Star formation is the gap between its body and the body of the preceding candle, at the same time the crossing of shadows is allowed. The star color does not matter. The stars appear on the highs and at the bottom. Sometimes the stars that appear during a downtrend is called Rain Drops. If the star body is extremely small or non-existent – such star named Doji Star. Star, especially the Doji Star, warns about a possible ending of preceding trend.
The small body of the Star indicates that the exhausting struggle between the Bulls (traders who are playing long) and the Bears (traders who are playing short) has come to a standstill. If a strong uptrend dominates the market, the Bull traders are in charge. The appearance of the Star after upward candles with a long body – it is the signal of the end of domination on the market and balance between supply and demand. This balance is caused either by easing the buyer’s pressure or strengthening the pressure by sellers. In any case, the star indicates that the uptrend potential is exhausted and this may change the market situation. The same thing, but mirroring goes for the stars on the downtrend.
The stars are parts of four reversal patterns:
1. Evening Star
2. Morning Star
3. Doji Star
4. Falling Star
In all these patterns, the body direction of the star is irrelevant.