Morning Star Pattern

Learn about morning star candles. Find out why morning star patterns are important in trading, and how forex markets can react.

What is a Morning Star Pattern?

Morning star pattern is a bullish three period candlestick formation that consists of…

  • a long red candle followed by…
  • a small red or green candle (or doji) that gaps below the close of the previous candle followed by…
  • a long green candle (stronger signal if gaps up)

It is also a leading short-term reversal indicator.

Morning Star Chart

Why are Morning Stars important?

  • The red candlestick confirms that the downtrend remains intact, and bears dominate.
  • When the second candlestick gaps down, it provides further evidence of selling pressure.
    • The small candlestick indicates indecision and a possible reversal of trend. If the small candlestick is a doji, the chances of a reversal increase (referred to as morning doji star).
  • The third long green candlestick provides bullish confirmation of the reversal.

So how do I use Morning Star candles?

Since morning stars are signals of a potential bullish reversal after a downtrend, they are helpful in confirming a significant bottom primarily when found near support. They are most useful in stop-loss placement with stops typically placed just below the completed formation.

Example 1: Morning star candlestick formation

Morning Star Chart

In the above example we have two completed morning star formations which are followed by bullish market reversals.

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