The Morning Star is one of the most powerful bullish reversal patterns in candlestick charting. This three-candle formation signals the end of a downtrend and the potential beginning of a new uptrend. Just as the morning star in the sky heralds the coming sunrise, this pattern announces the arrival of bullish momentum.
What is the Morning Star Pattern?
The Morning Star is a three-candlestick bullish reversal pattern that forms at the bottom of a downtrend. It consists of a large bearish candle, followed by a small-bodied candle that gaps down, and then a large bullish candle that closes well into the first candle's body.
Visual Description: Picture three candles in sequence - a tall red candle, then a small candle (can be any color) positioned lower like a star, and finally a tall green candle that rises back up. The "star" in the middle is what gives this pattern its name.
Morning Star Formation Requirements
For a valid Morning Star pattern, these elements must be present:
First Candle (Bearish)
- A large bearish (red) candle confirming the downtrend
- Should have a substantial body showing strong selling
- Represents continued bearish momentum
Second Candle (The Star)
- Small-bodied candle (can be bullish, bearish, or doji)
- Gaps down from the first candle's close
- Body should not overlap with first candle's body
- Represents indecision - sellers exhausting, buyers emerging
Third Candle (Bullish)
- A large bullish (green) candle
- Opens above the star's body
- Closes at least halfway into the first candle's body
- Confirms the bullish reversal
Psychology Behind the Morning Star
Understanding the market psychology helps you trade the pattern more effectively:
- Day 1: Bears remain in control, pushing price sharply lower. Sellers are confident the downtrend will continue.
- Day 2: Price gaps down on the open, but selling stalls. Neither bulls nor bears can gain control. This small candle shows the first sign of seller exhaustion.
- Day 3: Bulls step in aggressively. Price gaps up and continues higher throughout the day, closing well above the midpoint of Day 1's candle. Power has shifted from sellers to buyers.
Morning Star Variations
Morning Doji Star
When the middle candle is a Doji (open equals close), the pattern is called a Morning Doji Star. This is considered even more powerful because the Doji shows complete indecision before the bullish reversal.
Morning Star with Gap
In the ideal Morning Star, both the star candle gaps down from the first candle and the third candle gaps up from the star. However, in modern markets with extended hours trading, gaps are less common. The pattern is still valid without perfect gaps.
Morning Star Example
Stock XYZ has fallen from $100 to $70 over a month.
Day 1: Opens at $72, closes at $68 (large red candle)
Day 2: Opens at $67, trades in a tight range, closes at $67.50 (small doji)
Day 3: Opens at $69, closes at $74 (large green candle)
The third candle closes above the midpoint of Day 1 ($70), confirming the Morning Star.
How to Trade the Morning Star
Entry Strategies
Conservative Entry
Wait for the third candle to complete and close above the first candle's midpoint.
Enter on the open of the fourth candle or on a break above the third candle's high.
This confirms the pattern but may miss some of the move.
Aggressive Entry
Enter during the third candle once price crosses above the midpoint of the first candle.
This captures more of the move but has higher risk if the candle reverses.
Stop Loss Placement
- Below the star: Place stop below the low of the middle (star) candle
- Below the pattern: For wider stop, place below the low of the entire formation
- Choose based on your risk tolerance and the pattern size
Profit Targets
- Previous resistance levels from the downtrend
- Fibonacci retracement levels (38.2%, 50%, 61.8% of prior decline)
- Measured move: Height of the pattern projected upward
- Moving averages as dynamic targets
Factors That Increase Reliability
Support Levels
A Morning Star at a key support level is significantly more reliable:
- Previous swing lows
- Key moving averages (50, 100, 200 MA)
- Fibonacci retracement levels
- Round psychological numbers
Volume Pattern
- High volume on Day 1 shows selling climax
- Lower volume on Day 2 (the star) shows exhaustion
- High volume on Day 3 confirms buying interest
Oversold Conditions
- RSI below 30 when pattern forms
- Price extended below Bollinger Bands
- MACD showing bullish divergence
Third Candle Strength
- Larger third candle = stronger signal
- Third candle should close above first candle's midpoint at minimum
- Ideally closes above first candle's open for strongest signal
Morning Star Pattern Statistics
Historical analysis shows these approximate success rates:
- Standard Morning Star: 65-70% bullish reversal rate
- Morning Doji Star: 70-75% bullish reversal rate
- At key support with volume: 75-80% success rate
- Average price increase: 5-10% in the following 10 days
The Morning Star is considered one of the more reliable reversal patterns, especially when appearing at significant support levels.
Common Mistakes to Avoid
- Not waiting for completion: The pattern is not confirmed until the third candle closes
- Weak third candle: If the third candle does not close at least to the first candle's midpoint, the pattern is not valid
- No preceding trend: Morning Stars need a clear downtrend to reverse
- Ignoring context: Not checking support levels or oversold conditions
- Tight stops: Placing stops too close to the star's low gets stopped out prematurely
- Wrong timeframe: Morning Stars on intraday charts are less reliable than daily or weekly
High-Probability Morning Star Setup
Stock ABC falls from $150 to $100 (33% decline). At $100:
Price hits the 200-day moving average support
RSI reaches 25 (deeply oversold)
Day 1: Large red candle from $105 to $100
Day 2: Doji at $99 on low volume
Day 3: Large green candle from $100 to $108 on high volume
This setup has multiple confirming factors for a high-probability trade.
Morning Star vs. Similar Patterns
Morning Star vs. Three White Soldiers
Both are bullish reversal patterns, but Three White Soldiers consists of three consecutive bullish candles, while Morning Star has a bearish candle, a star, and a bullish candle.
Morning Star vs. Bullish Engulfing
Bullish Engulfing is a two-candle pattern while Morning Star is three candles. Morning Star includes a period of indecision (the star) before the reversal.
Morning Star vs. Hammer
The Hammer is a single candle pattern while Morning Star requires three candles. Morning Star typically signals stronger reversals.
Track Your Morning Star Trades
Pro Trader Dashboard helps you analyze which candlestick patterns perform best in your trading. See your win rates by pattern type.
Summary
The Morning Star is a powerful three-candle bullish reversal pattern that appears at the bottom of downtrends. It consists of a large bearish candle, a small-bodied star that gaps down, and a large bullish candle that closes well into the first candle's body. The pattern shows the transition from bearish to bullish control through a period of indecision. For highest reliability, trade Morning Stars at key support levels with volume confirmation and oversold indicator readings. The Morning Doji Star variation, where the middle candle is a doji, is considered even more reliable.
Learn more: Evening Star pattern and Three White Soldiers.