The Morning Star candle pattern is a technical analysis pattern used in stock trading. It is a three-candle pattern with the candle in the middle forming a star. It occurs at the bottom of a downtrend, and it’s often seen as a sign of a potential reversal in the market.
The first candle is a black long-bodied candle that extends the current downtrend. The second is a middle short candle that gapped down from the open and the third candle is a white long-bodied candle that gapped up open and closes up on top of the first candle.
The Evening Star candle stick pattern is the opposite of the Morning Star candlestick pattern. The evening star candle signifies a top reversal signal and impending negative news.
How to Identify a Morning Star
To identify a Morning Star, look out for the following;
Before the signal occurs, the price has to be in a downward trend,
The first candle, with a black long(or red) body, needs to validate the downtrend. This demonstrates the bears’ strong hold on the stock,
Either a Doji or a Star candlestick (of any color) must represent a state of indecision on the second candle,
This demonstrates that there is an equal demand and supply and that bulls and bears are competing for control,
A green (or white) candle that shuts at least halfway up the black (or red) candle from the first day must be used to symbolize the third candle,
This last candle indicates a reversal will take place.
