Morning Star

It is so named because just like the planet mercury appears just before the sun rise, this pattern appears just before price rise.

Formation
This formation consists of three candles.

First day is black candle.

Second day is black or white candle with a small real body, which gaps below the real body of the first day.

Third day is the long white candle, which gaps above the real body of the second day.

Study the chart given below.

On the next day, though the stock opens below the low of the previous day's real body, the supply decreases or the demand increases, so that the momentum of the falling market decreases. The stock closes near the opening, either above or below the opening, but below the close of the previous day. This creates a black or white candle with a small real body.

On the third day, with the bulls dominating, the market opens above the real body of the second day, rises up and closes high to create a long white candle.

This is a clear indication of the bullish reversal of the market.

Sometime the gaps may not be obvious.


Counter part of this pattern in a candle chart is Evening Star.

The second day candle may be a doji, which results in Morning Doji Star.