Morning Star

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.