|Three Outside Up
|Three Inside Up
|Morning Star Doji
|Abandoned baby Bullish
|Three White Soldiers
Morning Star Candlestick Chart pattern is a bullish reversal pattern of high reliability. This pattern is only valid when formed at a downtrend or at a possible support. This pattern is a three day pattern or formed by three continuous candlestick of following characteristic.
Day 1: On first day, a large bearish candlestick is formed, representing further continuation of a downtrend.
Day 2: On second day, a small candlestick either bullish or bearish, is formed which gaps down from the first candlestick formed on Day 1.
Day 3: On third day a large bullish candlestick is formed which gaps up from the candlestick formed on Day2. It opens above the close of the Day 2 candlestick and closes atleast near the center or midpoint of the candlestick formed on Day 1.
The strength of this pattern depends a lot on the size of the candlestick. The bigger bearish candlestick formed on day 1 in continuation of previous downtrend, shows the market sentiments is strongly under the control of bears. The second day formation of small candlestick (either bullish or bearish or neutral) with a gap down indicates that the bears are still holding the position but they are not able to push the price much lower further indicates that the bears strength is loosening. A bullish candlestick on day 2 speaks a lot more about bears weakness. Formation of long bullish candlestick on Day 3 confirm the pattern and shows that bull are taking over the market over the bulls strongly. If the third day candlestick opens with a gap up and closes above or atleast near the midpoint of the Day 1 candlestick, it indicates a strong trend reversal and a buy signal.
Morning Star Candlestick Chart Pattern by itself is useful in confirming trend reversal but one has to see the overall market and other technical indicators for its strength and reliability. Many traders also use price oscillators such as the MACD and RSI or volume to confirm the reversal.
Others uses the size of the candlestick to see the reliability of this patten.