The morning star is a powerful three-candle bullish reversal pattern that signals the end of a downtrend. Named after the planet Venus which appears before sunrise, this pattern represents hope emerging from darkness. When you spot a morning star at the bottom of a decline, it often marks the beginning of a new uptrend.
What is a Morning Star Pattern?
A morning star consists of three candlesticks that together signal a bullish reversal. The pattern shows the transition from seller control to buyer control over three trading sessions.
The three candles: First, a large bearish candle continues the downtrend. Second, a small-bodied candle (often a doji or spinning top) shows indecision. Third, a large bullish candle confirms the reversal. The middle star candle is the key to the pattern.
Morning Star Requirements
For a valid morning star pattern, these conditions must be met:
First Candle (Bearish)
- Large red candle with a substantial body
- Continues the existing downtrend
- Shows sellers still in control
Second Candle (The Star)
- Small-bodied candle (can be red or green)
- Gaps down from the first candle (opens below first candle close)
- Represents indecision and potential trend change
- Often a doji or spinning top
Third Candle (Bullish)
- Large green candle with a substantial body
- Opens above the second candle close
- Closes well into the first candle's body (at least 50%)
- Confirms the reversal
Morning Star Example
Stock ABC has dropped from $60 to $45 over several weeks.
- Day 1: Large red candle, opens $47, closes $45
- Day 2: Small doji, opens $44.50, high $45, low $44, closes $44.50
- Day 3: Large green candle, opens $45, closes $48
The pattern is complete. The third candle closes above the midpoint of the first candle, confirming the reversal.
The Psychology Behind Morning Star
Understanding why this pattern works helps you trade it with confidence:
Day 1: Continuation of Selling
The downtrend continues as sellers push prices lower. Fear dominates the market. The large red candle shows strong selling pressure and bearish sentiment.
Day 2: Indecision Emerges
The small star candle shows that selling pressure is weakening. The gap down on the open initially looks bearish, but prices cannot fall much further. Buyers and sellers are in balance. This is the transition period.
Day 3: Buyers Take Control
The large green candle confirms that buyers have taken over. The gap up on the open shows overnight buying interest. Strong buying throughout the session drives prices higher, recovering most or all of the first day's losses.
How to Trade Morning Star Patterns
Entry Strategies
Conservative Entry
- Wait for the third candle to close
- Enter on the next candle open or when price breaks above the third candle high
- Lower risk but may miss some of the move
Aggressive Entry
- Enter during the third candle once it is clearly bullish
- Higher risk but better entry price
- Only for experienced traders
Stop Loss Placement
Place your stop loss below the low of the star candle (second candle). This is the logical invalidation point. If price falls below this level, the pattern has failed.
Profit Targets
- Target 1: Previous resistance level or swing high
- Target 2: Measured move equal to the pattern height
- Target 3: Key Fibonacci extension level
Morning Star Variations
Morning Doji Star
When the second candle is a doji (open equals close), the pattern is called a morning doji star. This variation is considered more powerful because the doji shows perfect indecision before the bullish reversal.
Three Inside Up
Similar to morning star but without gaps between candles. The second candle is contained within the first candle's body, and the third candle closes above the first candle's open.
Factors That Strengthen Morning Star
- Volume pattern: Low volume on star, high volume on third candle
- Gap presence: Gaps between candles show stronger sentiment shift
- Support level: Pattern forming at key support increases reliability
- Oversold indicators: RSI below 30 adds confirmation
- Third candle size: Larger bullish candle means stronger reversal
Real Trading Scenarios
Scenario 1: Morning Star at Major Support
A stock falls to a major support level that has held multiple times before. A morning star forms right at this support. This confluence of the candlestick pattern and support level creates a high-probability long setup.
Scenario 2: Morning Star with Volume Confirmation
The first candle has average volume, the star has below-average volume (showing selling exhaustion), and the third candle has above-average volume (showing strong buying). This volume pattern confirms the reversal.
Scenario 3: Morning Star in Overall Uptrend
A stock in a long-term uptrend pulls back. A morning star forms at the 50-day moving average. This suggests the pullback is over and the uptrend will resume. These are often the highest probability morning star setups.
Common Mistakes to Avoid
- No prior downtrend: The pattern needs a downtrend to reverse
- Third candle too small: It should close well into the first candle
- Ignoring gaps: Traditional morning stars have gaps; without gaps, the signal is weaker
- Wrong stop placement: Stop below the star, not below the entire pattern
- Not waiting for completion: Do not trade until the third candle closes
Track Your Morning Star Trades
Pro Trader Dashboard lets you log and analyze trades by candlestick pattern. See your performance on morning star setups and discover patterns in your most successful trades.
Summary
The morning star is a reliable three-candle bullish reversal pattern that appears at the bottom of downtrends. It consists of a large bearish candle, a small indecision candle (the star), and a large bullish confirmation candle. Look for morning stars at support levels, confirm with volume, and place stops below the star candle. This pattern often marks the beginning of significant uptrends.
Learn the bearish counterpart in our evening star pattern guide or explore engulfing patterns.