Morning star Candlestick Pattern: The most frequently observed trend reversal signal

Trend reversal

The candlestick patterns have become the best tool to analyze the market for every trader. Whether you trade in a 30 min chart or 1-day chart candlestick won’t let you stay misguided.

Candlestick chart patterns help to decide trend reversals, which is the only thing that decides the fate of a trader.

This has made all traders fall for the candlestick. Similar craze you will find for morning star candlestick pattern. This is one among the best and frequently observed candlestick traders find while analyzing the chart. This is the reason it has become favorite and well known among all traders.

In my previous article, you have seen the 2 candlestick patterns Bullish engulfing and bearish engulfing.

Now this one is 3 candlestick chart pattern that gives bullish trend reversal signal.

Let’s jump its physical identification tricks and discuss what all can we do to utilize this signal and trade efficiently.

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Physical appearance of Morningstar Candlestick pattern

A morning star candlestick pattern is formed with a combination of 3 candles. This is found after a downtrend. The three candlestick is in order as

  1. Long bearish candle
  2. Small candlestick body with long shadow( may be bearish or bullish)
  3. The bullish candlestick that has a close price above the mid value of first bearish candlestick.

This three candlestick forms the Morningstar candlestick pattern. You can find this and I guess will be more explanatory in the below image.

morning star example__1
Source: Economic Times

Market Interpretation

The key interpretation lies here with the second candlestick where a small body forms. This basically explains that there is indecision in the market. Both buyers and sellers are reluctant and are on the same page with no domination.

So here an opportunity comes where a buyer may take the lead and change the trend direction or sellers become active again with their domination.

Here you need to check the time frame where you are analyzing the chart. If you find indecision in a 5 min chart this won’t add value to your interpretation. The longer the time frame the better the signal interpretation.

Check which investment strategy works best for you

This is obvious that you cannot conclude a market condition with 5 min chart but the same thing if you observe in a 4 hr chart you can assure that there is something wrong in the market or you can say indecision has caused among the buyers and sellers.

Even Doji and spinning top shows indecision in the market. 

This confirmation is done by the third candlestick which confirms the morning star candlestick pattern and also confirms the bullish reversal in the market.

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The close price here if you observe has crossed half the body of the first bearish candle. This makes you assure that the buyers are active now, the trend has changed and it is the time to enter the market.


Key elements to remember

  1. 3 candlestick pattern
  2. The first candlestick is long bearish candle followed by a candlestick with a small body and long tail.
  3. The second candlestick can be bearish or bullish, interpret the same thing that is indecision
  4. Third is bullish candlestick and is a confirmation candle that should have close price above the mid value of first bearish candle
  5. This can efficiently be interpreted when found after a downtrend
  6. Works well when gets confirmed with another technical indicator.

How to trade with Morningstar candlestick pattern

Here is a trendy example that may help you know how to analyze and identify morning star candlestick.

morning star example__3
Source: Economic Times

Bullish engulfing pattern can also help you analyze uptrend

Bottom Line

As I said Morningstar candlestick can be found easily that does not mean you force your eyes to find morning star candlestick everywhere. This won’t help unless you follow the other guidelines. Use proper analyzing techniques and confirmation tool to get your analysis come true.

Post Author: Sushant Putatunda

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