Bottom Reversal Form: Morning Star

The “morning star”, which usually refers to the Venus above the horizon before sunrise, signalizes the end of night and the day is coming soon.

In technical analysis, Morning Star morphology also has a similar meaning, which usually appears at the bottom of the market, suggesting that the trend may rise from a decline.

This article will introduce a bullish reversal candlestick pattern - Morning Star.

What is the Morning Star?

Morning Star is a bullish reversal candlestick pattern consisting of three candlestick, usually after a downtrend.

The first candlestick pattern is the big yin line; the second K-line entity is small and jump low open, similar to a “doji”; the third K-line is the Sun line, which plays a key guiding role in the next direction of the situation.

The third kline is characterized by a “high run”, and the closing price is higher than the central position of the first candlestick entity, suggesting that a bullish sprout in the market may lead to a trend rise from a fall.

How was the morning star formed?

The Morning Star pattern usually appears at the bottom of the market, at which point the share price may be at a stage low.

The first candlestick of the pattern, reflecting the market's obvious bearish sentiment, leading to lower stock prices.

The second K-line pattern jumped low, then further down, indicating that the market is still filled with a bearish atmosphere in the early market.

However, over time, the long gradually force, the short convergence, the final stock price settled slightly above or slightly below the opening price, suggesting that the market hesitated after a day of contest.

The third K-line pattern jump high open, and the closing price is higher than the center position of the first K-line entity, played a “hammer timophonic” role, implying bulls have the ability to dominate the market, trend or usher in reversal.

How to identify the morning star?

In actual combat, investors can pay attention to the following points to better identify Morningstar morphology.

• Downtrend

The first is to look for a downtrend on the K-line chart and find a potential bottom of the market.

• The first K-line

The first candlestick of the morning star should be a solid larger one, which continues the previous downtrend.

• Second K line

The second K-line should be a solid small K line, Yin or Yang are irrelevant, but it must jump low open. It is worth noting that the lowest price of the morning star pattern often appears on the second K line.

• Third K line

The third candlestick should be a larger positive, which jumps high, and the closing price is higher than the center of the first candlestick entity.

• Turnover

If the third K-line appears a “volume price rise”, it is beneficial for the bullishness of the market.

case analysis

The chart below shows a morning star pattern that appears on the daily chart of Broadcom (AVGO) shares.

• Before the morning star pattern, Broadcom stock price was on a downward trend.

• On the first day of the pattern, the stock price continued the previous downtrend to close with a big yin line.

• The next day, the stock price dropped further, but the intraday was little volatility, and eventually closed with a “cross”, suggesting that the market was indecisive.

• The third day of the pattern, the stock price went high, with a big sun line closing, suggesting that the market tended to bullish in the next few days.

summed

Morning Star is a bullish reversal candlestick pattern consisting of three candlestick, usually appearing at the bottom of the market.

Morning Star morphology helps long traders capture potential entry opportunities. While the standard Morningstar pattern may not be common, investors can get some inspiration from forms that are very similar to them.

In actual combat, candlestick patterns should be combined with other technical analysis tools to better assist trading decisions.