Morning Star¶
| Name | Type | Prerequisite | Use Cases |
|---|---|---|---|
| Morning Star | Bullish Reversal | OHLC Data | Signaling a bullish reversal at the bottom of a downtrend. |
Definition¶
The Morning Star is a three-candlestick pattern that indicates a bullish reversal. It consists of a long bearish candle, a small-bodied candle (open and close are close together) that gaps down, and a third long bullish candle that gaps up and closes well into the body of the first candle.
Pattern Structure¶
- Candle 1: Long red candle (downtrend continuation).
- Candle 2: Small body (red or green) that gaps down from Candle 1. Ideally a Doji or Spinning Top.
- Candle 3: Long green candle that gaps up from Candle 2 and closes above the midpoint of Candle 1.
Visualization¶
Story¶
The market is trapped in a gloomy downtrend, culminating in a strong bearish push. The next session opens with a gap down, but the selling pressure suddenly evaporates, leaving a small, indecisive candle—the 'star' in the dark. This hesitation is the calm before the storm. On the third session, the bulls launch a massive counter-offensive, driving the price deep into the territory of the first red candle. The dawn has arrived, and the bears are left scrambling to cover their shorts.
Trading Significance¶
- Exhaustion: The middle candle represents market indecision and seller exhaustion.
- Reversal Confirmation: The third candle confirms the return of buyers.
- Strong Signal: Considered a very strong bullish reversal signal.