Japanese candlesticks - Morning star
Definition: The morning star’s structure is made up of three Japanese candlesticks. The first is a large, solid, (red) bearish candlestick followed by a small bullish or bearish candlestick which closes below the first candlestick. The third candlestick is a large full bullish candlestick (green).
Characteristic: The morning star’s structure often forms after a significant drop characterized by several large, red Japanese candlesticks.
Significance: The morning star is a reversal pattern, it indicates a bullish trend reversal. The second candlestick reflects the inability of sellers to support the bearish movement, there is a lock of momentum and buyers eventually regain control.
Note: There are many variations in the second candlestick with this pattern. It can be separated from the other two (abandoned baby structure) or take the form of a doji (doji morning star). Regardless of the opening and closing levels, the important thing is that the candlestick’s body is small.
Doji Morning Star
Invalidation: If the next candlestick is not bullish or does not open on a bullish gap, the morning star structure is invalidated.