Hanging Man and Shooting Star

These are the bearish twins of the previous lesson. The shapes are identical; what changes is where they appear. That is the single most important idea in candlestick reading.

• Definition: small body near the top of the range with a long lower wick — exactly the hammer shape, but printed after an uptrend.
• Psychology: for the first time in the trend, sellers were able to drag price down hard within the period. Buyers repaired the damage by the close, but the willingness to sell is now visible.
• Where it forms: at the top of an extended uptrend, at resistance, or into a prior swing high.
• What usually happens next: if the following candle closes below the hanging man's body, the pullback often accelerates. If price closes above the high, buyers are still in charge.

• Definition: small body near the low of the range with a long upper wick at least twice the body, appearing after a rally.
• Psychology: buyers pushed price to a new high and were completely overwhelmed. Everyone who bought that spike is now underwater at the close — a supply of trapped buyers sits above.
• Where it forms: at resistance, at round numbers, or at the end of a strong impulsive leg up.
• What usually happens next: this is one of the more reliable single-candle reversals. A bearish close beneath it often starts a retracement toward the prior support.