The morning star is a three-candle bullish reversal pattern that appears after a downtrend. It suggests that selling pressure is fading and buyers may be taking control.
- Candle 1: a long red candle, continuing the fall.
- Candle 2: a small-bodied candle (red, green or a doji) that often opens lower, showing indecision.
- Candle 3: a strong green candle that closes well into the body of the first candle, ideally above its midpoint.
Here is a hypothetical example. A stock drops from ₹600 to ₹520 over two weeks. Day one is a long red candle closing at ₹520. Day two forms a tiny candle around ₹515. Day three opens at ₹518 and closes at ₹548, past the midpoint of day one’s body. That is a textbook morning star.
The pattern is stronger when it forms near a support level and when the third candle comes with higher volume. Traders often place a stop-loss below the low of the middle candle.
A common mistake is spotting it in the middle of a sideways range, where it means very little. The prior downtrend is what gives the reversal its meaning. Read our blog on three-candle patterns for more examples, and practise identifying them on live charts in our Technical Analysis course.