A long upper wick is a shooting star only after a rise

A shooting star counts when it forms after a rise and its upper shadow is at least twice its body. It also needs little or no lower shadow. Without the rise before it, the shape isn't the pattern at all.

That trend test is where trades go wrong. The same candle shows up after a sell-off or in a slow drift sideways. Traders see the tall wick and buy puts anyway. Then price just keeps doing what it was doing.

When a star fails, ask first what the trend into it was. More often than you'd like, the answer is that there wasn't a rise.

The second test is location. A star that prints at a resistance level you marked earlier has two reasons behind it. A star in open space has one, and that's a weak reason to risk premium.

The level from a shooting star is its high, the top of the upper wick. Use the extreme, not the body or the close. That price is where sellers stopped the push, so it's where they may be waiting next time.

Draw it on the daily, 4-hour or hourly chart. A star on the 5-minute can help time an entry, but it doesn't earn a level of its own.

The strongest version lines up with something already on your chart. Say a falling window from last week has its bottom edge near the star's high. Two separate patterns marking the same price raise your confidence in it.

The level works both ways from here. While price stays below the star's high, you look for puts. Once a candle closes above it, the star is finished, and the same price can turn into support.

Write the trade down in four parts before you enter. The conditions: a star after a rise, at resistance, with the higher chart not pushing hard upward. The entry: as close to the star's high as you can get. The stop: a candle close back above that high. The target: the next support level below.

Don't wait for three red candles to feel sure. Each confirming candle moves your entry further from the stop. By the time it feels safe, the reward often no longer covers the risk.

Pick the strike from the target. Buy the put whose strike sits where price is heading, rather than the cheapest one on the chain. A far out-of-the-money put only makes sense when the chart shows open space down to the next support.

On same-day expiry, set a clock. If price hasn't moved your way by the fifth candle of your entry chart, get out.

Your stop and target come from the chart, so there's a limit on where you can enter. Here's an example with made-up prices. The star's high is 251.40. The next support below is 248.90.

For a short trade, risk is the stop minus the entry, and reward is the entry minus the target. You want the reward to be at least twice the risk. Solve that and the entry has to be at least two times the stop plus the target, divided by three.

That's 2 times 251.40, or 502.80, plus 248.90, which makes 751.70. Divided by 3, it's 250.57. Below 250.57, the trade pays less than two to one, so you let it go.

Why two to one? At that ratio your breakeven win rate is 1 divided by 3, about 33 percent. That leaves room to be wrong more often than right and still come out ahead.

The clearest failure is a candle close above the star's high. That's your exit, whatever the put is worth at that moment. A wick above the high doesn't count, so judge it on the close.

Watch the bigger chart too. If the daily is in a strong uptrend, a star on the hourly is a counter-trend trade. Take it only at a level the charts agree is strong, and treat that as a judgment call.

Late entries fail too. If the star printed an hour ago and price has already dropped toward support, the trade is gone. Mark the next level and wait. Also keep your size honest. A wide star with a far-away high means fewer contracts, so the dollars at risk stay the same.

On your next chart, find the last three stars and check each one for the rise before it.