Morning Star

What Is the Morning Star Pattern?

The Morning Star is a three‑candlestick bullish reversal pattern that appears after a downtrend. It gets its name from the “morning star” in the sky, which precedes sunrise and symbolizes the potential start of a new bullish day. Traders use it to anticipate a shift from selling pressure to buying strength.

Components of the Morning Star

The pattern has three candles: a long bearish candle showing strong selling, a small‑bodied candle (which can be bullish, bearish, or even a Doji) that signals indecision, and a strong bullish candle that closes well into the body of the first candle. The second candle often gaps down from the first, reinforcing the idea that bears are attempting to push lower but are losing their grip.

Market Psychology Behind the Formation

The first candle reflects capitulation by buyers as sellers dominate. The second small candle shows that bears are struggling to push prices much lower, and buyers are quietly stepping in. The third bullish candle confirms the shift in sentiment, as buyers aggressively drive price higher and absorb remaining selling pressure.

Trading the Morning Star Pattern

Traders usually wait for the third candle to close before taking action. A bullish close above the midpoint of the first candle is often seen as a strong signal to consider long entries. Some traders enter on the close of the third candle, while others wait for a minor pullback toward the pattern to get a better risk‑reward ratio.

Risk Management and Confirmation

Common stop‑loss placement is just below the low of the pattern, as a break under that point invalidates the bullish idea. For added confirmation, traders may check whether the pattern occurs at a major support level, near a trendline, or after oversold readings on oscillators. Volume expansion on the third candle can further boost confidence in the reversal.