Morning Star Japanese Candlestick Pattern

The Morning Star Pattern usually occurs at the bottom of the downtrend and is a bullish reversal pattern. The pattern has three components:

Day1)  Large Bearish Day: A long black candlestick.
Day2) A small Bullish or Bearish candlestick that gaps below the previous day’s close. This candlestick could also be a doji, in which case the pattern would be a morning doji star.
Day3) A long Bullish candlestick.

Spread betting example of the morning star.

The Morning Star pattern appears at the bottom of a downtrend with a first large bearish reversal candlestick pattern. The first day, the bears are definitely in control, often making new lows.

Day 2 begins with a bearish gap down. It is clear from that the bears are in control as this candle stick gaps lower. However, as the day proceeds, the bears are unable to push prices lower. The candlestick on Day 2 is often a small candlestick and can be bullish, bearish, or a Doji candlestick pattern (neutral/Indecision).

A bullish candlestick on Day 2 is a stronger sign of  turn in trend, indicating a possible reversal. But Day 3 is the highlight of the Morning Star Pattern, as it begins with a gap up. This is a strong bullish sign showing the bulls are in control, pushing prices higher, often reversing Day 1’s losses.

Morning Star Forex Spread Betting Example

The chart below of the Forex Spread betting pair EUR/GBP shows a spread betting example of a Morning Star bullish reversal pattern that occurred at the end of a downtrend:

Day 1 of the Morning Star pattern in the EURGBP chart above was a strong red bearish red candle. Day 2 showed sign of reversal as the Day ended with a small positive sign after opening with a Gap Down. Day 2 Bears were unable to continue the downtrend of the previous day. Day 3 the bears tried again to push lower but failed and the bulls took strong control, Pushing aggressively upwards squeezing the bears out of the market and closing way above the close of Day 1. Both the downward trendline break and the classic Morning Star pattern gave traders a signal to go long and buy EURUSD Forex Spread betting pair.

The Morning Star pattern is a very strong three candlestick bullish reversal pattern. The opposite of the Morning Star Pattern is the Evening Star pattern, a bearish pattern (see: Evening Star).

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