David Waring

In our last lesson we looked at the Hammer and Hanging Man Candlestick Chart Patterns. In today’s lesson we are going to look at two more reversal candlestick patterns which are known as the Morning and Evening Star.

The Morning Star


The Morning Star Candlestick Pattern is made up of 3 candles normally a long black candle, followed by a short white or black candle, which is then followed by a long white candle. In order to have a valid Morning Start formation most traders will look for a close of the third candle that is at least half way up the body of the first candle in the pattern. When found in a downtrend, this pattern can be a powerful reversal pattern.

What this represents from a supply demand situation is a lot of selling into the downtrend in the period which forms the first black candle, then a period of lower trading but with a reduced range which forms the second period and then a period of trading indicating that indecision in the market, which is then followed by a large up candle representing buyers taking control of the market.

Unlike the Hammer and Hanging Man which we learned about in our last lesson, as the Morning Star is a 3 candle pattern traders often times will not wait for confirmation from the 4th candle before entering the trade. Like those patterns however traders will look to volume on the third day for confirmation. In addition traders will look to the size of the size of the candles for indication on how big the reversal potential is. The larger the white and black candle and the further that the white candle moves up into the black candle the larger the reversal potential.


The Evening Star


The Evening Star Candlestick Pattern is a mirror image of the Morning Star, and is a reversal pattern when seen as part of an uptrend. The pattern is made up of three candles the first being a long white candle representing buyers driving the prices up, then a short white or black second candle representing indecision in the market, which is followed by a third black candle down which represents sellers taking control of the market.

The close of the third candle needs to be at least half way down the body of the first candle and as with the Morning Star most traders will not wait for confirmation from the 4th period’s candle to consider the pattern valid. Traders will look for increased volume on the third period’s candle for confirmation, the larger the black and white candles are and the further the black candle moves down the body of the white candle the more powerful the reversal is expected to be.


Other Links to Help You Learn about Morning Star and Evening Star Patterns

The Morning Star - A Powerful Candlestick Reversal Signal
Evening Star Candlestick Formation -- A complete definition
Evening Star Candlestick Chart Pattern
Morning Star Candlestick Formation, Definition - Trading Glossary

That’s our lesson for today. In our next lesson we are going to finish up our series on Candlestick patterns with a look at the Shooting Star and Inverted Hammer Candlestick Patterns.

As always if you have any questions or comments please leave them in the comments section below so we can all learn to trade together, and good luck with your trading!

stocknovice

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ziggy©

Hi David,

I noticed that on both the morning/evening star patterns in your examples, there is a gap up/down between the middle candle and the other two. Is the gap up or down required for it to be a valid morning/evening star candle or is it that if there is a gap up/down then its a stronger pattern but an evening/morning star without the gap up/down is still valid.

Thanks

Simit Patel

a gap is not required; for instance you will see the morning/evening star pattern frequently in the forex market, where gaps are much rarer, but the pattern can still be a legitimate tool.