Morning Star Candlestick Pattern

The “Morning Star” candlestick formation consist of three candles, and is very bullish. It is a reversal pattern, and forms at the bottom of a downtrend. The first candle of the three is a very bearish and large candlestick. This is followed by a second candle that has a small body, and closes below the first candle. This candle can be either bullish or bearish, just as long as a closes lower. The third candle in this formation is a large bullish candle that opens above the second candle, and closes near the center of the first candle. In other words, wiping out much of the losses over the previous two candlesticks.

Morning Star Formation

Morning Star Formation

 

This candlestick pattern appears over and over, and can be quite useful in determining a potential reversal of the trend. When you have to keep in mind is that most of the sellers are now losing money, so it becomes a little bit of a self-fulfilling prophecy. For those who are a little bit more conservative, waiting until the original candle is broken above might be the best way to trade this pattern, but nonetheless, as you can see on the chart below, the Morning Star in question was an excellent buying opportunity as the trend reversed, and then shot much higher.

Morning Star in action.

Morning Star in action.

 

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