Morning Star Pattern –
Morning Star Pattern is a multiple candlestick pattern which consist of three candlesticks which occurs during the downtrend. This is a bullish reversal pattern which gives sign of trend reversal from bearish to bullish. First candle is a strong bearish candle, second one candle is a indecisive candle and third one candle is strong bullish candle which closes approximately near to opening of first candle which signals trend reversal.
As we can see the first candle is strong bearish which shows bearish trend is continuing. Second candle opened lower than first candle close (gap down). This candle is indecisive which means neither bullish nor bearish like doji. We can also find this candle structure like hammer or inverted hammer. Third candle opened higher than second candle close (gap up). Third candle is strong bullish candle which closed above the first candle opened which shows trend reversal signal.
In above chart, we can see the price was taking the support after the bearish trend. The price goes in sideways for long time and when it formed morning star pattern shown in blue circle, the price started going in up trend. In this way this pattern helps us to find out trend reversal. This pattern usually forms at support zone and in downtrend direction.
We can see in above chart, the morning star pattern is represented by using by blue circle. Prior trend was bearish and the morning star pattern formed at the support level. The second candle of morning star pattern is hammer which shows bullish signals as we have discussed. After forming morning star pattern the price reversed and started moving in upward direction.
If the pattern forms during uptrend, it signals that the uptrend will continue further. We can also use indicators like moving average, RSI for more confirmation.