Morning Star Candlestick Pattern
The morning star candlestick pattern is composed of at least three candles. The first candle has a large body and is a “down” candle. The second candle has a small body, representing a spinning top
or a doji
. The third candle has a large body, is of approximate size as the first candle, and is an “up” candle.
Morning Star Candlestick Pattern Analysis
The morning star candlestick pattern represents a possible reversal to the upside. Similar to other reversal patterns, the morning star candlestick pattern is most significant when it is preceded by an established trend - in this case, a down trend.
The morning star candlestick pattern becomes increasingly relevant when the following occur:
- Candles one and two have large bodies and are approximately equal in length.
- The middle candle – candle 2, has a relatively small body similar to a spinning top or a doji.
- It is preceded by a strong down trend.
- Confirmation candles are used to confirm the reversal.
- Oversold indicators confirm a change in market direction.
Forex Trading Ideas
The morning star candlestick pattern may be traded alone, or with a combination of signals and/or indicators. For example:
- Step 1 – Wait for a morning star candlestick pattern to appear during an established down trend.
- Step 2 - Confirm the trend reversal with at least one confirmation candle.
- Step 3 – Further confirm oversold conditions using the Relative Strength Index Indicator.*
- Once conditions 1 – 3 are met place an entry order.
*Additional confirmation ideas – confirm the morning star candlestick pattern when it appears outside of the Bollinger Band or when the Stochastic Oscillator signals an oversold condition.
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