The Morning Star is a pattern seen in a candle stick chart, a popular type of a chart used by technical analysts to anticipate or predict price action of security, derivative, or currency over a short period of time. The pattern is made up of three candles normally a long bearish candle, followed by a short bullish or bearish doji or a small body candlestick, which is then followed by a long bullish candle. To have a valid Morning Star formation, most traders look for the top of the third candle to be at least halfway up the body of the first candle in the pattern. Black candles indicate falling prices, and white candles indicate rising prices
Morning Star
Morning star patterns can be used as a visual sign for the start of a trend reversal from bearish to bullish, but they become more important when other technical indicators back them up as previously mentioned. Another important factor is the volume that is contributing to the pattern formation.
Generally, a trader wants to see volume increasing throughout the three sessions making up the pattern, with the third day seeing the most volume. High volume on the third day is often seen as a confirmation of the pattern (and a subsequent uptrend) regardless of other indicators. 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
The morning star pattern comes in a minor variation. When the price action is essentially flat in the middle candlestick, it forms a doji This is a small candlestick with no significant wicks—not unlike a + sign. The doji morning star shows the market indecision more clearly than a morning star with a thicker middle candle.
The appearance of a doji following a black candle will generally see a more aggressive volume spike and a correspondingly longer white candle due to more traders being able to clearly identify a morning star-forming.
Morning Star
Morning star patterns can be used as a visual sign for the start of a trend reversal from bearish to bullish, but they become more important when other technical indicators back them up as previously mentioned. Another important factor is the volume that is contributing to the pattern formation.
Generally, a trader wants to see volume increasing throughout the three sessions making up the pattern, with the third day seeing the most volume. High volume on the third day is often seen as a confirmation of the pattern (and a subsequent uptrend) regardless of other indicators. 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
The morning star pattern comes in a minor variation. When the price action is essentially flat in the middle candlestick, it forms a doji This is a small candlestick with no significant wicks—not unlike a + sign. The doji morning star shows the market indecision more clearly than a morning star with a thicker middle candle.
The appearance of a doji following a black candle will generally see a more aggressive volume spike and a correspondingly longer white candle due to more traders being able to clearly identify a morning star-forming.
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