Morning Star Candlestick Pattern: A Bullish Reversal Signal
The morning star is a three-candle Japanese candlestick pattern that technical analysts read as a bullish reversal signal. It forms after a downtrend and points to the start of a bullish reversal. It is also treated as an early sign of a change in price direction, so traders watch for the morning star to form and then look for confirmation that the reversal is actually happening, using additional indicators.
Key Points of the Morning Star Pattern
- The morning star is a candlestick pattern made up of a large bearish candle, a smaller second candle with a short body and long wicks, and a fairly large bullish third candle.
- The middle, or second, candle shows a moment of hesitation in the market as sellers start giving way to buyers. The third candle confirms the reversal and can point to a new uptrend.
- The opposite pattern to the morning star is the evening star, which signals a reversal of an uptrend into a downtrend.
What Does the Morning Star Pattern Tell You?
The morning star is a visual pattern, so there is no specific calculation needed to identify it — after three sessions, it has either formed or it has not. That said, other technical indicators can help gauge whether a morning star is actually forming, such as whether price is approaching a support zone, or whether the Relative Strength Index (RSI) shows the asset is oversold. The morning star pattern appears as follows:
In the chart above, the middle second candle in the pattern can be bullish or bearish — it makes no difference, as long as it has a small body and long wicks, showing buyers and sellers starting to reach a balance during the session.
How to Trade the Morning Star Pattern
Morning star patterns can be used as a visual signal that a downtrend may be reversing into an uptrend, but they carry more weight when other technical indicators, or support and resistance levels, back them up. Another important factor is the volume behind the candles that make up the pattern.
Generally, a trader looking at the morning star pattern wants to see trading volume increase across the three candles that form it, from the decline into the rally, with the third candle carrying the largest volume. Traders often treat strong volume on that third candle as extra support for the pattern and the bullish reversal, though it should still be weighed alongside other indicators rather than taken as certain on its own.
Based on this, a trader may take a bullish position in the stock, commodity, pair, or other asset once the morning star forms on the third candle, riding the uptrend until other indicators point to a further reversal.
Morning Star vs. Doji Pattern
The morning star differs slightly from the doji. When price action is mostly choppy on the middle second candle, it forms a doji — a small candle with no notable wicks, not unlike a plus sign. The morning star, by contrast, shows market hesitation through a smaller body and longer wicks that stand out more clearly than a doji’s thicker middle candle. A morning star forming after a bearish candle will generally see a sharp rise in volume and a longer bullish candle, since traders can identify the morning star forming more clearly.
Morning Star vs. Evening Star
The opposite of the morning star is, of course, the evening star. The evening star is a long bullish candle followed by a small or short candle, then a long bearish candle that falls and closes at least halfway down the length of the first session’s bullish candle. The evening star signals a reversal of an uptrend as buyers give way to sellers.
Limits of Using the Morning Star Pattern
The morning star pattern is a visual pattern made up of three candles that technical analysts read as bullish signals. It forms after a downtrend and points to the start of an uptrend. It is also a sign of a reversal in the prior price direction, and traders watch for the morning star to form before looking for confirmation that the reversal is actually happening, using additional indicators.
Trading purely on visual candlestick patterns and formations can be a risky proposition. The morning star works better when it is backed by ideal volume across its three candles and by other indicators such as a support level. Otherwise, it is very easy to mistake a small candle with long wicks in a downtrend for a morning star that is not really forming.
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Frequently Asked Questions
What does the morning star pattern signal?
The morning star pattern is made up of three candles and appears at the end of a downtrend, pointing to the start of an uptrend — in other words, it is a reversal pattern.
Is the morning star bullish?
Yes, the morning star is a pattern that signals a shift from a downtrend to an uptrend.
Is the morning star a good pattern?
The morning star is considered one of the well-known candlestick reversal patterns; it appears at the end of a downtrend and reflects a shift in price to the upside.
Is the morning star a reversal pattern?
Yes, the morning star is a reversal pattern that reflects a shift from a downtrend to an uptrend. Traders use it to look for potential entry points, though outcomes vary and confirmation from other indicators is still needed.
Read more:
Explaining Japanese Candlestick Technical Analysis in Trading
High Wave Candle Pattern
Disclaimer: This article is for educational purposes only and does not constitute investment advice. Trading forex and CFDs with leverage carries a high level of risk and may not be suitable for all investors; you can lose more than your initial deposit. The candlestick pattern described above is an analytical tool, not a guarantee, and past performance does not predict future results. This page may contain affiliate links, and we may earn a commission if you open an account through them, at no extra cost to you.
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