If you’ve ever wished upon a star, I hope that that star was a Morning Star candlestick pattern. Unlike the Evening Star, an omen that hints at bad things to come (i.e., low stock prices), the Morning Star is a sign of good fortune. If you spot this bullish reversal signal, which is composed of three candles, you can expect stock prices to increase. Although the bears have been in control, the bulls are ready and able to take over. To learn how to spot the Morning Star signal, how to decipher its characteristics, and how to interpret its meaning, just scroll down.

Morning Star Candlestick Pattern

Formation

First, to confirm that you have indeed spotted a Morning Star candlestick pattern, check for the following criteria:

First, the stock must be in a downtrend before the signal occurs. Second, the first candle must confirm the downtrend with a long black (or red) body. This shows that the bears have firm control of the stock. Third, the second day must convey a state of indecision through either a Star candlestick (of either color) or a Doji. This shows that supply and demand is equal, and the bears and the bulls are fighting for control. Fourth and finally, the third day must be represented by a white (or green) candle that closes at least halfway up the first day’s black (or red) candle. This last candle confirms that a reversal will occur.

The Morning Star candlestick pattern is the opposite of the Evening Star, which is a top reversal signal that indicates bad things are on the horizon.

Meaning

The Morning Star candlestick pattern brings good tidings! The first candle shows that a downtrend was occurring and the bears were in control. However, after a tug-of-war and a period of uncertainty, the bulls successfully took over. You can expect increased stock prices to follow.

To get more information about this story of triumph, pay attention to the characteristics of the Morning Star’s candlesticks. Look for the following signs:

• The longer the candles, the greater the reversal force.
• If there is a gap between the first and second day (conveying a stronger sense of indecision), the odds of a reversal increase.
• If there is a gap on both sides of the Star candle, the probability of a reversal is even higher.
• The higher the third day’s white (or green) candle comes up in relation to the first day’s black (or red) candle, the greater the strength of the reversal.

So when you see a Morning Star, take heart! A sunrise should soon follow. However, remember to take your time and confirm your findings before you make any hasty moves. Good luck!

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