Morning Star candlestick pattern

The Morning Star is a three-candlestick pattern that signifies a bullish reversal and the end of a downtrend. This pattern is widely recognized in candlestick analysis and is essential for identifying a bottom and considering asset purchases.

Complementing its bearish counterpart, the Evening Star, the Morning Star is also a trend reversal pattern indicating a shift in market direction. The key feature shared by both patterns is the presence of a relatively short candlestick in the central position (the 2nd candlestick). Despite their structural similarities, these patterns yield opposing results; the Evening Star denotes a bearish reversal, while the Morning Star implies a bullish reversal.

Traders might encounter confusion between the Morning Star and the Morning Doji Star pattern. The distinguishing factor lies in the 2nd candlestick: the Morning Doji Star always incorporates a doji candlestick. Furthermore, the 2nd candlestick of the Morning Star initiates with a price gap, a characteristic not mandatory for the Morning Doji Star. In both scenarios, the 2nd candlestick represents the market's indecisiveness.

Construction

1st

• candle in downtrend
• long red body

2nd

• red or green body
• equal sized up and bottom shadow as indicator of uncertainty
• candle high price above 1st candle low price
• significantly smaller than 1st and 3rd candlesticks, excluding possibility of doji
• opens with price gap below low price of 1st candlestick^①

3rd

• long green body
• open price with gap up above 2nd candlestick close price^①

Confirmation of the Morning Star should be sought in subsequent candles by observing a break of the trendline or the nearest resistance zone formed by the initial candlestick of the pattern.

Stop loss order can be placed below the recent low (2nd candlestick), as a break of this level would invalidate the reversal.