The morning star pattern
The morning star pattern is considered as a bullish reversal pattern, it often occurs at the bottom of a downtrend and it consists of three candlesticks:
-The first candlestick is bearish which indicates that sellers are still in charge of the market. -The second candle is a small one which represents that sellers are in control, but they don’t push the market much lower and this candle
can be bullish or bearish. -The third candle is a bullish candlestick that gapped up on the open and closed above the midpoint of the body of the first day, this
candlestick holds a significant trend reversal signal. See the example below:
The morning star pattern shows us how buyers took control of the market from sellers, when this pattern occurs at the bottom of downtrend near a support level, it is interpreted as a powerful trend reversal signal. See the example below:
The chart above helps us identify the morning star pattern and how it is significant when it is formed at the bottom of a downtrend. As you can see the pattern occurred at an obvious bearish trend. The first candle confirmed the seller’s domination, and the second one produces indecision in the market, the second candle could be a Doji, or any other candle. But here, the Doji candle indicated that sellers are struggling to push the market lower. The third bullish candle indicates that buyers took control from sellers, and the market is likely to reverse.
This is how professional traders analyze the market based on candlestick patterns, and this is how you will analyze financial markets if you can master the anatomy of candlestick patterns and the psychology behind their formations.
The evening star pattern
The evening star pattern is considered as a bearish reversal pattern that usually occurs at the top of an uptrend. The pattern consists of three candlesticks: –
-The first candle is a bullish candle
-The second candle is a small candlestick, it can be bullish or bearish or it can be a Doji or any other candlestick.
-The third candle is a large bearish candle. In general, the evening star pattern is the bearish version of the morning star pattern.
See the example below:
The first part of an evening star is a bullish candle; this means that bulls are still pushing the market higher. Right now, everything is going all right. The formation of the smaller body shows that buyers are still in control but they are not as powerful as they were. The third bearish candle indicates that the buyer’s domination is over, and a possible bearish trend reversal is likely to happen. See another chart that illustrates how the evening star could represent a significant trend reversal signal.
As you can see the market was trending up, the first candle in the pattern indicates a long move up. The second one is a short candle indicating price consolidation and indecision. In other words, the trend that created the first long bullish candlestick is losing momentum. The final candlestick gaping lower
than the previous candlestick indicating a confirmation of the reversal and the beginning of a new trend down.