The Morning Star is a bullish three-candlestick pattern signifying a potential bottom. It warns of weakness in a downtrend that could potentially lead to a trend reversal. The morning star consists of three candlesticks with the middle candlestick forming a star.
The bullish reversal pattern consists of the following three candlesticks:
A long-bodied black candle extending the current downtrend
A short middle candle that gapped down on the open
A long-bodied white candle that gapped up on the open and closed above the midpoint of the body of the first candle.
The star can be a bullish (empty) or a bearish (filled in) candle.
To identify a Morning Star, look for the following criteria:
The price must be in a downtrend before the signal occurs.
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.
The second candle must convey a state of indecision through either a Star candlestick (of either color) or a Doji.
This shows that supply and demand are equal, and the bears and the bulls are fighting for control.
The third candle 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.