The Morning Star is a three day bottom reversal pattern.
The Day 1 of the morning star pattern consists of a long bearish candlestick after a previous downtrend.
The Day 2 candlestick gaps down, i.e candlestick opens at a lower price than the first day’s closing price. It must be a small candlestick and can be either bullish or bearish; however the key is that the real body of the this candlestick will be below the real body of the first day.
The Day 3 is a large bullish candlestick that closes into the first day’s real body. When the Day 2 candlestick is a Doji in the Morning Star then the pattern becomes Morning Doji Star.
Psychology behind the pattern is Day 1 is a large bearish candlestick that strengthens the prior continual downtrend. The Day 2 candlestick opens lower than the Day 1 close, thus gapping down and once again shows that the bears are in control of the market. However, the bears are not able to push prices further downward. The doji, or small real body of the Day 2 shows there is a stalemate between the bulls and the bears. On Day 3 bullish candlestick shows that the bulls are now in control of the market.
Practice Morning Star Pattern – Beginner
Practice Morning Star Pattern – Intermediate