Type: Reversal
Relevance: Bullish
Prior Trend: Bearish
Reliability: High
Confirmation: Suggested
No. of Sticks: 3
This is a three-candlestick formation that signals a major bottom. It is composed of a first long black body, a second small real body, white or black, gapping lower to form a star. These two candlesticks define a basic star pattern. The third is a white candlestick that closes well into the first session’s black real body. Third candlestick shows that the market turned bullish now.
Recognition Criteria:
1. Market is characterized by downtrend.
2. We see a long black candlestick in the first day.
3. Then we see a small body on the second day gapping in the direction of the previous downtrend.
4. Finally we see a white candlestick on the third day.
Explanation:
We see the black body in a falling market suggesting that the bears are in command. Then a small real body appears implying the incapacity of sellers to drive the market lower. The strong white body of third day proves that bulls have taken over. An ideal Bullish Morning Star Pattern preferably has a gap before and after the middle candlestick. The second gap is rare, but lack of it does not take away from the power of this formation.
Important Factors:
The stars may be more than one, two or even three. The color of the star and its gaps are not important. The reliability of this pattern is very high, but still a confirmation in the form of a white candlestick with a higher close or a gap-up is suggested.
Morning star is a part of candle stick chat patterns and although, its a reversal signal when the market in an uptrend move, but candlestick signal can not be traded alone, it should be combined with other technical indicators. I am still learning about them but I know it is a signal that shows trend reversals in the market.
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