Morning Star Candlestick Formation

downward price

That tells me the trend after the breakout from a morning star takes a while to get going but it tends to keep moving up. Patience is probably a good word for what you need when trading this candle pattern. As the Piercing pattern is a bullish trend reversal pattern, it must appear in an existing downtrend before the pattern can be taken into consideration.


This means that you need to look at the chart and see a pattern emerging. As with other patterns, the most important part of using the morning star pattern is to look at the chart. Head and shoulders pattern is considered to be one of the most reliable reversal chart patterns. This pattern is formed when the prices of the stock rises to a peak and falls down to the same level from where it had started rising. The Dark Cloud Cover pattern is the opposite of the Piercing pattern and appears at the end of an uptrend. It is a dual candlestick pattern with the first candlestick being light in color and having a large real body.

As a side note, the piercing pattern that occurred 15 days prior to the morning doji star pattern suggested a support level . Both dojis closed above that support line, giving even more confidence in the bullishness of this chart’s morning doji star candlestick pattern. The psychology of the morning star candlestick pattern is described next. The first day of the morning star candlestick is a large bearish candlestick that reinforces the prior continual downtrend. The second day candlestick opens lower than the prior day’s close, thus gapping down and once again reinforcing that the bears are in control of the market. However, the bears are not able to push prices downward much further.

The Morning Star pattern is not very effective in a bearish market because its signal is against the downtrend. However, the pattern could signal a short-term rally or consolidation before the downtrend resumes. If you are a contrarian mean-reversion trader, you may attempt such trades but know that you would be going against the trend. Drilling down into the data, we find that the best average move 10 days after the breakout is a drop of 8.53% in a bear market, ranking 3rd for performance. I consider moves of 6% or higher to be good ones, so this is near the best you will find.

A trader will take up a bullish position in the stock/commodity/pair/etc. As the morning star forms in the third session and rides the uptrend until there are indications of another reversal. Limitation of Morning star pattern is that since this is a three-candle pattern, you must wait until the end of the third trading candle to complete the pattern. Normally, if this third candle is a tall white or green candle, we will get a good signal after the market has rallied sharply.

What is the evening star pattern?

Like being able to constantly monitor the stock price during the day, keeping your news channel on for any update news or any other livewire news online? I really want to know this because, I’ll tell you something about myself. After working for 6 years in corporate world I Ieft my job in 2014, since then I have been looking for a job but no luck. Now I’ve started to think about making trading as my full time career.


That may sound like a lot, and it is, but it falls well short of the 5,000 or more samples that I like to see. In short, expect the decline to be less severe as more samples become available. However I would have been happier if the prior trend was a bit more pronounced and the 3rd day candle a bit longer.

What Does a Morning Star Candle Mean?

Therefore, these should be used in conjunction with other technical indicators. Many investors believe that trading solely on visual patterns is dangerous. One of the most commonly cited reasons is that it can be difficult to distinguish between a genuine trend reversal and a false signal. This is particularly true of the morning star pattern, which is often seen as an indicator of a bullish reversal. This small variation in price action can signal a weaker reversal than a typical morning star pattern. However, both patterns are typically found at the end of a downtrend and can signal a potential turning point in the market.

morning stars

The three most common types of triangles are symmetrical triangles, ascending triangles, and descending triangles. More specifically, we’ll only enter a if the morning star is effectuated below the lower Bollinger Band. However, since the last candle of the pattern often is a strong bullish one, it means that we won’t get many trades if we require the whole pattern to be below the lower band. As such, the only requirement is that the middle candle is below the lower band. The market gaps up, and more people turn bullish, wanting to get in in anticipation of the next uptrend.

Trading the morning star candlestick pattern

Continuation patterns indicate that the current trend has a greater probability of continuing rather than the trend being reversed. Continuation patterns generally form in an existing trend when the price action enters a fairly brief period of consolidation. During this consolidation phase, the trend appears to weaken as profit taking takes place. However, the continuation of the preceding trend is more probable once the consolidation has completed.

  • The morning star candlestick pattern is often a reasonably reliable market indicator.
  • Morning star candlestick pattern originates from Japanese rice merchants.
  • Waiting for a confirmation on the 4th day may not be necessary while trading based on a morning star pattern.
  • However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date.
  • Driving comes naturally irrespective of which car you are driving.

But I do know people who manage this well….common trait across all these traders are that they place longer term trades. Something like a 1 week futures position or even equity position. In the absence of P2’s doji/spinning top, it would have appeared as though P1 and P3 formed a bullish engulfing pattern.

For the best performance from the morning star candlestick, look for it when the primary trend is rising. Then the morning star appears as part of a downward retrace of that uptrend. When an upward breakout occurs, price joins with the rising price trend already in existence and away the stock goes like a child’s helium balloon untethered. CharacteristicDiscussionNumber of candle linesThree.Price trend leading to the patternDownward.ConfigurationLook for a tall black candle in a downward price trend.

Typically, the first of the three candles has the longest body. The next candle is smaller, and the last one is shaped like a star. This star indicates that the downward trend is showing signs of weakness. Read on to learn more about copy trading and how it could benefit you. All four of these websites offer users the ability to screen for stocks using various criteria, including price, volume, technical, and fundamental indicators.

What Is a Morning Star?

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The chart is used to predict or anticipate price action of a derivative, currency, or security over a short period. The pattern formed is known as the morning star pattern forex. The main difference between the morning star candlestick and evening star candlestick patterns is that the morning star is considered a bullish indicator, while the evening star is bearish. Candlestick reflects the impact of investors on security prices that are used by analysts that determine the time of entry and exit the trade.

The consists of a small bearish candlestick followed by a large bullish candlestick and another small bearish candlestick. The evening star is considered a bearish reversal pattern and can be used to enter short positions or exit long positions. Morning star candlestick pattern originates from Japanese rice merchants. The identification is done by star if the small body of the candle is positioned above the price range of the previous candle.