Original subtitles

0 Hello, guys, and welcome to the next lecture in Section 4, where I will explain the first two 1

candlestick patterns called the Hammer and the Shooting star patterns. 2

As the name suggests, hammer pattern looks like a hammer. 3

It occurs after a downtrend and signals bullish sentiment with the buying strength coming back into 4

the market. 5

On the other hand, shooting star is the opposite candlestick formation to hammer and a shooting star appears 6

after an uptrend and signals the bearish sentiment with selling strength entering the market. 7

Let us quickly look at a typical hammer and shooting star formation using an illustration. 8

A hammer signifies that sellers were able to push the prices lower initially before the buyers took 9

control of the price, and the closing price is well above the opening price of the session. 10

The lower tail or wick of the Hammer candle is usually twice the size of the real body of hammer. 11

A shooting star on the other side brings a pause to the buying strength as the buyers were able to push 12

prices higher early in the session before sellers are able to close the session well below the opening 13

price of the candle. 14

The upper tail or wick of the shooting star candle is usually more than twice the size of the real 15

body of the candle. 16

Please note that it is possible for a shooting star to have a small wick and for hammer to have a small 17

upper wick. 18

Guys, for both of these patterns, the lower tail for the hammer and the large upper tail for the shooting 19

star is a sign of increased strength associated to this pattern. 20

Now, when it comes to taking trading positions based on these patterns, you will always consider following 21

key points: 1. whether a shooting star pattern or a hammer appeared after a clear uptrend or downtrend, 22

respectively. 23

This means that the importance of the pattern increases when they appear after clear market trends. 24

2. whether these patterns are also associated to key support and resistance zones on your trading chart. 25

If this happens, you are able to trade these patterns with increased confidence. 3. While one shooting 26

star after a clear up trend, signals the bearish sentiment. 27

However, if you see two or three consecutive shooting stars, then this is adding even more bearish 28

sentiment in the market. 29

Exactly the same guidelines apply for consecutive Hammer patterns. 30

Now let us study what we've learned in this lecture 31

through examples. 32

Guys, the first example is of GBPJPY forex pair, and we are looking at a shooting star 33

formation. 34

Notice how the price rallied in an uptrend on this pair before a shooting star appeared at the key support 35

zone. Also noticed the larger upper tail of the shooting star, which explains that buyers failed to push 36

prices higher during this trading session. 37

In addition, following the shooting, star price fell sharply on this pair towards the next level. 38

Let's look at another example of shooting star. In the next example, we're looking at daily chart of 39

EURUSD forex pair. 40

Once again, notice that the market was in clear uptrend prior to shooting star candle. 41

Guys, I want you to compare the real bodies of the shooting star examples you've studied so far in 42

this lecture. 43

A shooting star indicates bearish sentiment, but a shooting star with a bearish colored body is of 44

increased strength. 45

Once again, price declined here. 46

And another shooting star was recorded after a few sessions before price declined sharply. 47

Let us study another example of shooting star now on CHFJPY forex pair daily chart. 48

As you see here, after a clear uptrend, a shooting star appeared with a long upper wick at key 49

support level and price fell sharply after that. 50

In addition, once prices reached a key level, which acted as a resistance, a hammer candle appeared indicating 51

the buying strength on this pair as price went higher in a sideways movement. 52

The next example is of hammer on crude oil daily chart. 53

See how this pattern appeared on a major support level with a large lower tail indicating the buying 54

strength in the market. 55

Moreover, following this hammer, price rallied sharply towards the next key resistance level. 56

Let's study one final example in this lecture. 57

Now we're looking at GBPUSD on a daily chart to study another strong hammer formation. 58

The color of this hammer formation is also bullish, hence indicating increased 59

buying strength in the market. 60

And once this hammer candle appeared at a major support, price rallied sharply in an uptrend. 61

Guys, this also concludes this lecture. 62

And I will see you in the next lecture where we study another two of my favorite candlestick patterns. 63

.