Morning Star

The Morning Star is a bullish three-candlestick pattern that indicates a potential market bottom. It serves as a warning of weakness in a downtrend, which may lead to a trend reversal. This pattern consists of three candlesticks, with the middle candlestick taking the form of a star.

The bullish reversal pattern includes the following three candlesticks: a long-bodied black candle that extends the current downtrend, a short middle candle that gaps down at the open, and a long-bodied white candle that gaps up at the open and closes above the midpoint of the first candle's body. The star can either be a bullish (empty) or a bearish (filled) candle.

Recognition Criteria

To identify a Morning Star, look for these criteria: the price must be in a downtrend prior to the signal. The first candle should confirm the downtrend with a long black (or red) body, indicating that the bears have strong control over the stock. The second candle must reflect a state of indecision, represented by either a Star candlestick (of any color) or a Doji, showing that supply and demand are balanced, with bears and bulls contesting control. The third candle should be a white (or green) candle that closes at least halfway up the body of the first day’s black (or red) candle, confirming that a reversal is imminent.

Meaning

The Morning Star candlestick pattern is the inverse of the Evening Star, which signals a top reversal and suggests negative developments ahead. The first candle indicates that a downtrend was in progress and that bears were in control. However, after a struggle and a phase of uncertainty, the bulls manage to take over. Following this pattern, one can expect an increase in stock prices.

To gain further insight into this narrative of victory, observe the characteristics of the Morning Star’s candlesticks. Look for the following indicators: the longer the candles, the stronger the reversal force. If there is a gap between the first and second candles, indicating a heightened sense of indecision, the likelihood of a reversal increases. A gap on both sides of the Star candle further elevates the probability of a reversal. The higher the third candle’s white (or green) body rises in relation to the first day’s black (or red) candle, the stronger the reversal is likely to be.

Reliability is bolstered by how much the real body of the third candlestick penetrates the real body of the first candlestick, particularly if the third candlestick has little or no upper shadow. If volume data is accessible, reliability is further enhanced when the volume on the first candlestick is below average, while the volume on the third candlestick is above average.