- Sentiment: Bullish
- No. of candles: 3
- Direction: Reversal
What Is The Morning Star Pattern?
The Morning Star is a bullish reversal pattern consisting of three candlesticks. The Japanese candlestick pattern forms after a downtrend or during a period of market consolidation.
The first candle in the sequence is a long bearish candle, signaling that sellers are in control.
The second candle is a small-bodied candle, also known as a star, which can be either bullish or bearish and opens below the close of the first candle. It signifies a potential weakening of the bearish momentum.
The third and final candle is a long bullish candle that closes above the midpoint of the first candle’s body, indicating a strong buying pressure and a potential trend reversal.
What Is The Psychology Behind The Morning Star Pattern?
The Morning Star pattern reflects a shift in market sentiment. Initially, the bears are in control, pushing the price lower with a long bearish candle.
The appearance of the small-bodied star suggests that selling pressure is decreasing, and the market is indecisive.
The long bullish candle signals that buyers have regained control and are driving prices higher, which may lead to a bullish trend reversal.
Japanese Candlestick Charting Techniques, Second Edition
47% OffHow To Trade The Morning Star Pattern? Buy Trigger & Stop Loss Levels Explained
To trade the Morning Star pattern, wait for confirmation by the third candle. The buy trigger occurs when the third bullish candle closes above the midpoint of the first bearish candle’s body.
Place a stop loss order below the low of the second candle (the star) to protect against potential false breakouts.
As the price moves in your favor, you can use trailing stops or other risk management techniques to lock in profits and minimize potential losses.
Additional Tips
While the Morning Star pattern can be a powerful reversal signal, it is important to use it in conjunction with other technical indicators and chart patterns to confirm the trend change.
Additionally, be aware of the overall market context and consider factors such as support and resistance levels, as well as the strength of the prevailing trend.
Continue to learn about Japanese candlesticks through books, such as Steve Nison’s “Japanese Candlestick Charting Techniques” and “Beyond Candlesticks.”