In this lesson, you will learn how to interpret more Japanese complex candlestick formations and we’ll start with Morning Star Candlestick Pattern.
Japanese Candlestick Pattern Morning Star
The Morning Star is an upside-down reversal pattern that develops at the end of a downtrend. The following chart shows a morning star pattern:
- The first candlestick is bearish.
- The second candlestick has a small body. It does not matter if it is bullish or bearish (though a bullish body with or without a small top wick indicates more bullish power). The second candlestick serves as an indicator that bear traders are no longer able to push the market down. In some cases, the second candlestick has no body (a so-called Doji).
- The third candlestick is bullish and closes at least within the first candle or even above the middle of the first candlestick. This indicates that the cops gain the upper hand.
There is another type of Japanese Candlestick – Evening Star which also shows the reversal of direction.
- Morning Star and Evening Star are reversal formations.
- The first candlestick follows the direction of the trend.
- The second candlestick can be bullish or bearish and has a small body that reflects the indecision in the market.
- The third candlestick follows the direction of the reversal and preferably closes over (morning star) or below (evening star) the middle of the first candlestick.