Morning Star Candlestick Pattern

Morning Star candlestick patterns are categorized as bullish reversal candlestick patterns. These candlestick patterns tend to provide very strong support areas. Morning Doji Star candlestick patterns and Abandoned Baby Bottom candlestick patterns are special types of Morning Doji Star candlestick patterns, but these two candlesticks provide even stronger support than a normal Morning Star candlestick pattern.

All of these candlestick patterns consist of a series of 3 candlesticks that develop at the bottom of downtrends and signal a change for the stock’s share price from a downtrend to an uptrend.

As a stock’s share price continues its descent, the Bears appear to be in full control as the last candlestick was a bearish, long red candlestick (this is the 1st candlestick in a series of 3).

At the open of the next trading session, the Bears are feeling confident as the share price tends to gap-down from the 1st candlestick’s real body and continue its descent through the early part of the trading period. But sometime before this trading period ends, the Bulls stage a rally and the share price starts rising again. Share prices tend to close below their highs by the end of the trading session, but the Bulls have definitely gained the upper hand (this is the 2nd candlestick in a series of 3).

A Morning Star candlestick pattern has completed development after the 3rd trading session ends. The Bulls continue their rally that started during the 2nd trading session. This buying rally causes a long green candlestick to develop by the end of the trading session. This 3rd candlestick then completes a Morning Star candlestick pattern.

Requirements

The following requirements are for Morning Star candlestick patterns. Any specific differences for Abandoned Baby Bottom candlesticks and Morning Doji Star candlesticks are noted.

• These candlestick patterns must develop at the bottom of an established downtrend
• Each of these candlestick patterns is made up of a group of 3 candlesticks
  • The 1st candlestick is a long, red bearish candlestick that tends to leave a medium-length lower shadow
  • The real body of the 2nd candlestick is quite a bit smaller than the 1st candlestick’s real body and usually has a red colored real body
    • The 2nd candlestick opens lower than the 1st candlestick’s real body – it is extremely important that the real bodies from the 1st & 2nd candlesticks do not touch
    • An Abandoned Baby Bottom candlestick pattern has a different 2nd candlestick – it has a Falling Window candlestick pattern (gap-down) develop between the 1st & 2nd candlesticks
  • The real body of the 3rd candlestick in the group is green colored
    • The 3rd candlestick pattern will start with a gap-up in the morning
    • The real body from the 3rd candlestick must penetrate high into the real body of the 1st candlestick
    • The real bodies of the 2nd and 3rd candlesticks should not touch either

Characteristics & Observations

Listed below are some of the other characteristics for Abandoned Baby Top candlestick patterns, Morning Star candlestick patterns and Morning Doji Star candlestick patterns, as well as some of my personal observations for them.[s2If !current_user_can(access_s2member_level1)]…..

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• The longer and more established that downtrends are that lead up to Abandoned Baby Bottom candlestick patterns, Morning Star candlestick patterns and Morning Doji Star candlestick patterns, the greater the chance is that the stock’s share price will experience a successful trend reversal

• I’ve noticed that when the 2nd candlestick’s real body is mostly contained within the lower shadow from the 1st candlestick, there tends to be a stronger chance for the downtrend to reverse into a very strong uptrend

• The higher that the real body from the 3rd candlestick in the group penetrates into the real body of the 1st candlestick, the more bullish the reversal pattern tends to be

• Like all Doji candlestick patterns, when a Morning Star candlesticks develop it is extremely important to analyze the chart immediately to determine where the stock is in the trend of one larger degree

Support Areas

The very bottom of the 2nd candlestick in a Morning Star candlestick pattern is defined as the support area. The support area is the same for Abandoned Baby Bottom candlesticks and Morning Doji Star candlesticks. Look for the very bottom of the lower shadow. If the 2nd candlestick does not have a lower shadow, the bottom of the real body is the support area.

As with any type of support area, whether it’s from a trendline, a moving average line or a candlestick pattern, a support area is negated when a stock or index’s share price closes below the support area.

To negate the support areas from any type of Morning Star candlestick pattern, a subsequent candlestick must close below the very bottom of the 2nd candlestick in the pattern. In order to accomplish this, the share price will typically need to see an extremely heavy trading period that includes a lot of selling volume. This heavy selling volume is needed to not only break through the support area, but also close below it for a couple of subsequent periods to try to negate the support.

Bearish Counter-Parts

The bearish counter-part to a Morning Star candlestick pattern is an Evening Star candlestick pattern. The bearish counter-part to an Abandoned Baby Bottom candlestick pattern is an Abandoned Baby Top candlestick pattern. The bearish counter-part to a Morning Doji Star candlestick pattern is an Evening Doji Star candlestick pattern. Most bullish candlestick patterns have bearish counter-parts, no matter what the pattern is.

The main difference between Morning Star candlestick patterns and Evening Star candlestick patterns is where the patterns develop in the trend for the stock’s share price.

Morning Star candlesticks develop at the bottom of downtrends and are bullish reversal candlestick patterns. These candlesticks suggest that a reversal for the stock’s share price is imminent. In contrast, Evening Star candlestick patterns develop at the top of uptrends and are bearish reversal candlestick patterns.

Trading Strategies

Listed below are some of the trading strategies for Morning Star candlestick patterns, including Abandoned Baby Bottom candlesticks and Morning Doji Star candlesticks.

• Since all types of Morning Star candlestick patterns are bullish reversal candlestick patterns, once one is identified the first consideration is to start purchasing shares and scaling-into a long position, especially if the candlestick patterns are accompanied by heavier than normal buying volume or a capitulating volume spike

• Morning Star and Morning Doji Star candlestick patterns that develop on heavier than normal buying volume are not only a major buy signals, but they tend to provide very strong buying support during any subsequent re-tests of the support area

As a general strategy, it is best to begin a scale-in process and purchase shares to begin accumulating a long position either 1) immediately after a Morning Star or Morning Doji Star candlestick pattern develops, or 2) after the first re-test of the pattern’s support area.

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