Hammer

The hammer is a bottom reversal pattern that comes after a wave of selling, meaning that is it indicating that downward momentum is coming to an end. The long lower shadow and the close of near the upper end of the session's highs indicates that there was a sharp sell off during the session but prices bounced back closing near its highs. The session closing near its high is important so the hammer should have either a miniscule or no upper shadow.

The hammer is signaling a potential bullish reversal, after a huge down move, sellers pushed prices further down but buyers stepped back in and closed the session near its highs.

The bullish close above the hammer is signaling that the trend has changed and traders with short positions should close them.

Shooting Star

The Shooting Star has a small real body and a long upper shadow. This means that buyers initially pushed prices to the highs of the session only for sellers to step back in a push prices back to near the session's opening price. The Shooting Star is relevant only when it appears after an uptrend and it signals that a trend reversal might appear.

The Shooting Star appearing at a potential market top is a sign that the uptrend might potentially reverse.

The bearish close below the Shooting Star is a signal that the trend has changed and traders should look to close their long positions.

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