Today the markets price action created a Shooting Star Candle Stick pattern. This is considered a Bearish Reversal Candlestick.
Shooting Star Candlestick: The shooting star candlestick comes during an uptrend. It is defined by a long wick and a body at the end of the candle. There is also a low that is put in on the stock below the open. What this candle represents is the stock opened and traded higher. Eventually selling pressure came in near the highs and pushed the price back down towards the open and eventually making a low as well. The key defining feature is the long wick that is about twice the size of the body and a small wick below the body.
Bearish Indications: The Shooting Star candle is bearish, since its represents a failure at highs and establishes a resistance level.
Looking at SPY’s Shooting Star Candlestick: When we look at this shooting star we can see the highs at right at the top of the channel that SPY has formed. The wick gives further evidence that the 140.17 level is resistance. The candle also represents a bearish reversal pattern meaning that the uptrend should stop and reverse to the downside. This makes sense with SPY’s current price action, SPY is at the top of its channel and over the last 3 weeks we have seen SPY hit the top of the channel and move back down. SPY has formed a pattern of climbing for 5% and dropping 3%. All this coupled with the candle makes sense that SPY may be weakening at this level and looking to head back down to 134.85. There still needs to be confirmation of this candle which would come from another down day. Better confirmation would be a break of 139.36 and 138.72