Tutorial on Morning Star Candlestick Pattern

What is Morning Star?

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.

For this pattern to be formed it is extremely important:

a. It should formed in a downtrend.
b. The open price of the Day 2 candlestick is lower than the close price of Day 1 candlestick.
c. The close price of the Day 2 candlestick is also lower than the close price of Day 1 candlestick.
d. The close price of the Day 3 candlestick is higher than the 50% of the Day 1 candlestick.

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.

Precautions to be taken while utilizing this Pattern:

1.It is important to reconfirm the pattern by integrating this pattern with the study of other technical indicators. Therefore adding any one of the other indicators like Volume, Stochastic, RSI, MACD etc. with chart patterns, one can further enhance the probability of the pattern reliability.
2.Like if this pattern is formed at the bottom of a downtrend together with overbought condition then it further strengthen strong buy signal. If it is formed in an uptrend or in sideways market it is of no significance.

Now we have learnt what is Morning Star Candlestick Chart pattern, it is the time to see them in real life. Our website provides free Morning Star Candlestick Chart pattern. It can be found at this link

Corresponding Patterns of Morning Star Candlestick Pattern is as follows:
1. Morning Doji Star
2. Doji

Example of Morning Star Chart Pattern: Educomp Solutions Ltd.

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