The Morning Star is a bullish three-candlestick pattern signifying a potential bottom.
It warns of weakness in a downtrend that could potentially lead to a trend reversal.
The morning star consists of three candlesticks with the middle candlestick forming a star.
The bullish reversal pattern consists of the following three candlesticks:
- A long-bodied black candle extending the current downtrend
- A short middle candle that gapped down on the open
- A long-bodied white candle that gapped up on the open and closed above the midpoint of the body of the first candle.
The star can be a bullish (empty) or a bearish (filled in) candle.
To identify a Morning Star, look for the following criteria:
- The price must be in a downtrend before the signal occurs.
- The first candle must confirm the downtrend with a long black (or red) body. This shows that the bears have firm control of the stock
- The second candle must convey a state of indecision through either a Star candlestick (of either color) or a Doji.
- This shows that supply and demand are equal, and the bears and the bulls are fighting for control.
- The third candle must be represented by a white (or green) candle that closes at least halfway up the first day’s black (or red) candle.
- This last candle confirms that a reversal will occur.
The Morning Star candlestick pattern is the opposite of the Evening Star, which is a top reversal signal that indicates bad things are on the horizon.
The first candle shows that a downtrend was occurring and the bears were in control. However, after a tug-of-war and a period of uncertainty, the bulls successfully took over. You can expect increased stock prices to follow.
To get more information about this story of triumph, pay attention to the characteristics of the Morning Star’s candlesticks. Look for the following signs:
- The longer the candles, the greater the reversal force.
- If there is a gap between the first and second candles (conveying a stronger sense of indecision), the odds of a reversal increase.
- If there is a gap on both sides of the Star candle, the probability of a reversal is even higher.
- The higher the third candle’s white (or green) candle comes up in relation to the first day’s black (or red) candle, the greater the strength of the reversal.
Reliability is enhanced by the extent to which the real body of the third candlestick pierces the real body of the first candlestick, especially if the third candlestick has little or no upper shadow.
If volume data is available, reliability is also enhanced if the volume on the first candlestick is below average and the volume on the third candlestick is above average.