Morning Star

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Figure 1. Morning Star pattern.

Japanese name: sankawa ake no myojyo
Forecast: bullish reversal
Trend prior to the pattern: downtrend
Opposite pattern: Evening Star

Construction:

• First candle
  • a candle in a downtrend
  • black body
• Second candle
  • white or black body
  • the candle body is located below the prior body
• Third candle
  • white body
  • the candle body is located above the prior body
  • the candle closes at least halfway up the body of the first line

The first line is any black candle appearing as a long line in a downtrend: Long Black Candle, Black Candle, Black Marubozu, Opening Black Marubozu, Closing Black Marubozu.

The second line may be any white or black candle appearing as a short line, except the doji candles. The body of the candle needs to be placed below the prior body, that is the opening and closing price needs to be lower than those of the previous candle. In other words there needs to be a gap between the first and the second body.

The third line is a white candle appearing as a long line, that is: Long White Candle, White Candle, White Marubozu, Opening White Marubozu, Closing White Marubozu. The opening price needs to be located above the prior candle’s body. The candle should close at least halfway up the body of the first line. Some sources do not require a gap between the second and the third body.

Shadows length or the lack of it do not matter for any pattern line.

It happens that first two lines may form the Inverted Hammer candlestick pattern.

The Morning Star should be confirmed on the subsequent candles, by breaking the trendline or the nearest resistance zone, which may be formed by the first line of the pattern. If the pattern is confirmed, its third line may become a support zone. When the pattern is not confirmed it may be merely a short pause before further market declines.

Figure 2. A Morning Star pattern appears in a short downtrend, within a support area formed by a Rising Window a few weeks earlier.
The bulls control the stock, and the price moved back above a trendline. A Closing White Marubozu formed at a high trading volume indicates the strength of the bulls, however, they still have to break a resistance set up by the last peak. However, price bounced off resistance and started moving sideways.

Figure 3. A Morning Star appearance is preceded by a strong downtrend which was started by a Falling Window formed at a very high trading volume. A Long Black Candle strengthened a strong resistance zone.
Although prior the Morning Star, three other bullish reversal patterns occurred (Bullish Harami, Three Inside Up and Inverted Hammer), the overall market sentiment is very bearish. It is worth to note that all white candles are formed at a low trading volume, which indicates that there is no capital on the market willing to reverse the trend. The stock moved sideways for around two weeks time.

Morning Star statistics

Below you can find some Morning Star pattern statistics calculated by CandleScanner software.