Morning Star Candlestick Pattern

The Morning Star is a bullish reversal pattern that signals the potential end of a downtrend. It consists of three candles and typically forms at the bottom of a bearish trend, indicating a shift from selling pressure to buying momentum.

Structure of the Morning Star Pattern:

1. First Candle (Bearish):

• A long red (bearish) candle that continues the existing downtrend.

•This confirms strong selling pressure.

2. Second Candle (Indecision / Small Body)

• A small-bodied candle (red or green) that gaps down from the first candle.

• It can be a Doji or a small spinning top, showing market uncertainty.

• This indicates that selling pressure is weakening.

3. Third Candle (Bullish Confirmation)

• A strong green (bullish) candle that closes well above the midpoint of the first candle.

• This confirms that buyers have regained control.

Key Characteristics:

✅ The second candle is small and gapped down, signaling indecision.

✅ The third candle must close above the midpoint of the first candle.

✅ Stronger when forming at a major support level or with high volume.

Psychology Behind the Pattern:

• The first bearish candle reflects strong selling pressure.

• The second small candle shows indecision, meaning sellers are losing momentum.

• The third bullish candle confirms the reversal, as buyers step in with force.

Trading Strategy:

📌 Entry: After the third (bullish) candle closes above the first candle’s midpoint.

📌 Stop-loss: Below the second candle’s low.

📌 Target: Next resistance level or based on a risk-reward ratio (e.g., 1:2).

Since the Morning Star is a strong trend reversal pattern, it becomes more reliable when confirmed with high volume and technical support zones.