Morning star (candlestick pattern)

Pattern seen in stock market chart

Illustration of the morningstar pattern

The Morning Star [1] is a pattern seen in a candlestick chart, a popular type of a chart used by technical analysts to anticipate or predict price action of a security, derivative, or currency over a short period of time.

## Description

[edit]

The pattern is made up of three candles: normally a long bearish candle, followed by a short bullish or bearish doji or a small body candlestick,[1] which is then followed by a long bullish candle. To have a valid Morning Star formation, most traders look for the top of the third candle to be at least halfway up the body of the first candle in the pattern. Black candles indicate falling prices, and white candles indicate rising prices.[2]

## Interpretation

[edit]

When found in a downtrend, this pattern can be an indication that a reversal in the price trend is going to take place. What the pattern represents from a supply and demand point of view is a lot of selling in the period of the first black candle. Then, a period of lower trading with a reduced range, which indicates indecision in the market, forms the second candle. This is followed by a large white candle, which represents buyers taking control of the market. As the Morning Star is a three-candle pattern, traders often don't wait for confirmation from a fourth candle before they buy the stock. High volumes on the third trading day confirm the pattern. Traders look at the size of the candles for an indication of the size of the potential reversal. The larger the white and black candle, and the higher the white candle moves in relation to the black candle, the larger the potential reversal.

The chart below illustrates.

The Morning Star pattern is circled. Note the high trading volumes on the third day.

The opposite occurring at the top of an uptrend is called an evening star.[3]

## See also

[edit]

* Technical analysis
* Chart pattern

## References

[edit]

1. ^ a b "Candlestick Pattern Dictionary [ChartSchool]". school.stockcharts.com. Retrieved 20 November 2020.
2. ^ Chen, James. "Morning Star". Investopedia. Retrieved 20 November 2020.
3. ^ "Candlestick Pattern Dictionary [ChartSchool]". school.stockcharts.com. Retrieved 2024-03-03.

* v
* t
* e

Technical analysis

Concepts|

* Breakout
* Dead cat bounce
* Dow theory
* Elliott wave principle
* Market trend

Charts|

* Candlestick
* Renko
* Kagi
* Line
* Open-high-low-close
* Point and figure
* Line break

Patterns|

| Chart|

* Broadening top
* Cup and handle
* Double top and double bottom
* Flag and pennant
* Gap
* Head and shoulders
* Island reversal
* Price channels
* Triangle
* Triple top and triple bottom
* Wedge pattern

|

Candlestick|

| Simple|

* Doji

|

Complex|

* Hikkake pattern
* Morning star
* Three black crows
* Three white soldiers

Point and figure|

* Bull trap
* Bear trap

Indicators|

| Support &
resistance|

* Fibonacci retracement
* Pivot point (PP)

|

Trend|

* Average directional index (A.D.X.)
* Commodity channel index (CCI)
* Detrended price oscillator (DPO)
* Know sure thing oscillator (KST)
* Ichimoku Kinkō Hyō
* Moving average convergence/divergence (MACD)
* Mass index
* Moving average (MA)
* Parabolic SAR (SAR)
* Smart money index (SMI)
* Trend line
* Trix
* Vortex indicator (VI)

Momentum|

* Money flow index (MFI)
* Relative strength index (RSI)
* Stochastic oscillator
* True strength index (TSI)
* Ultimate oscillator
* Williams %R (%R)

Volume|

* Accumulation/distribution line
* Ease of movement (EMV)
* Force index (FI)
* Negative volume index (NVI)
* On-balance volume (OBV)
* Put/call ratio (PCR)
* Volume–price trend (VPT)

Volatility|

* Average true range (ATR)
* Bollinger Bands (BB)
* Donchian channel
* Keltner channel
* CBOE Market Volatility Index (VIX)
* Standard deviation (σ)

Breadth|

* Advance–decline line (ADL)
* Arms index (TRIN)
* McClellan oscillator

Other|

* Coppock curve
* Ulcer index

Analysts|

* John Bollinger
* Ned Davis
* Charles Dow
* Ralph Nelson Elliott
* Bob Farrell
* John Murphy
* Mark Hulbert

*[v]: View this template
*[t]: Discuss this template
*[e]: Edit this template