Hammers and Shooting Stars are unreliable as trend reversal signals. That's not to say that you can't find examples of a trend reversing after the appearance of one of these candles. But they're far more reliable when used as trend continuation patterns.
Examples.......
1. A downtrending market rallies as buyers pile in and push prices up.
But the upward push soon fizzles out, and a Shooting Star shows up. The long upper tail of the Shooting Star shows where the buyers have been flushed out and higher prices have been rejected. The low close of the SS shows that the bears are back in control.
The downtrend is about to resume.
2. An uptrending market sells off as profit takers bail out. The selloff proves to be only temporary, and a Hammer shows up. The long lower tail and the high close of the Hammer show where the sellers have been flushed out and the buyers are piling back in to take advantage of the cheaper prices.
The bulls have regained control and the uptrend is about to resume.
The above examples are one of the strategies I use to trade Forex from end of day charts. It's a simple system and very profitable.
Hammers and Shooting Stars can add additional reliability to the patterns used in the PPS system. When found within a triangle, they increase the probability of the triangle breaking out in the direction of the trend.
Similarly, when a Hammer forms the second bottom of a double bottom within an uptrend, it increases the likelihood of the uptrend resuming.
When a Shooting Star forms the second top of a double top within a downtrend, it increases the probability of the downtrend resuming strongly.