Introduction
The Morning Star is widely considered one of the most reliable reversal patterns in technical analysis. Just as the morning star (planet Venus) appears before sunrise, this pattern appears right before a new uptrend begins.
Unlike single-candle spikes, this pattern unfolds over three days, giving it significant structural weight.
How to Identify a Morning Star
This pattern requires three specific candles in order:
- Day 1 (The Drop): A long Red candle confirming the existing downtrend.
- Day 2 (The Star): A small-bodied candle (red or green) that gaps down from the first candle. Ideally, it looks like a Spinning Top or Star.
- Day 3 (The Sunrise): A long Green candle that surges up and closes deep into the body of the first Red candle.
The Psychology
- Panic: The first candle shows strong selling pressure.
- Indecision: The middle candle (Star) shows that sellers have exhausted their supply. The gap down indicates fear, but the price doesn’t drop further.
- Resolution: The third candle proves that buyers have taken control, forcing short-sellers to cover their positions.
How to Trade It
- Entry: Enter at the open of the 4th candle, or just before the close of the 3rd candle if the momentum is strong.
- Stop Loss: Place your stop below the low of the middle “Star” candle.
- Target: Look for the top of the previous downtrend swing.