Definition
Morning Star consists of three candles: a long bearish candle, a small-bodied candle (star) that gaps down, and a long bullish candle that closes into the first candle's body. It represents a transition from selling to buying pressure.
Formula
Day 1: Long bearish; Day 2: Small body gaps down; Day 3: Long bullish closing into Day 1
Example
Day 1: Strong red candle to $45. Day 2: Small doji at $44. Day 3: Strong green candle closing at $48. This three-day pattern signals a bottom.
FAQ
What is Morning Star Pattern?
A three-candle bullish reversal pattern signaling the end of a downtrend.
How do you calculate Morning Star Pattern?
A common formula for Morning Star Pattern is: Day 1: Long bearish; Day 2: Small body gaps down; Day 3: Long bullish closing into Day 1
Why is Morning Star Pattern important?
Morning Star Pattern helps investors evaluate candlestick patterns and make more informed decisions.