Evening Star and Morning Star patterns guideline (PDF)

Morning and evening star patterns are more complicated and more infrequent than single-candle structures. A Morning Star is a triple candlestick pattern that occurs at the bottom of a downtrend and reveals a bullish reversal. In fact, it is a three-candle pattern that indicates that the proceeding downtrend would reverse soon. To explain, the morning star consists of three consecutive candles in the forex exchange. First, there is a bearish candlestick. Second, a bearish or bullish one with a tiny body. Third, a bullish candle. And vice versa for the evening star candle. So, the morning and evening star formations are split into three distinct candles in which we will discuss the relationship between them to better understand these complex forex patterns. Also, we will discuss the morning Doji star in this technical analysis review.

Morning star candlestick

What is Morning star candlestick pattern?

The morning star is a bullish reversal pattern that usually materializes at the bottom of a downside move in the form of three candlesticks:
  • First candle is bearish indicating that bears are still maintaining control in the crypto market.
  • Second candle is smallish implying that sellers are losing market control. Because they have not pushed the exchange much lower. Besides, this candle may be either bearish or bullish.
  • Third one is a bullish candlestick that closes beyond the midpoint of the body of the first candle. To clarify, this candlestick holds for a powerful trend reversal sign.
Note that the structure below is a perfect morning star candlestick that may be a little bit different from what it really shapes in the forex market.
morning star candlestick pattern

What does the Morning Doji star mean?

The morning Doji star means a very accurate design that occurs in the forex market when the 2nd-candle is a “Doji”. In fact, the later candle indicates that bears are struggling to move prices much lower. Besides, it is an obvious sign of indecision as it keeps the price activity flat. So, the selling pressure will probably diminish next to the Doji occurrence. To explain, this indecision will stimulate a bullish movement that is confirmed by the appearance of the bullish third candle. Finally, The third bullish candlestick affirms that bulls grabbed control from bears. Hence, a crypto market reversal is on the way. In conclusion, a Doji adds more confirmation to the morning star pattern.

Morning Doji star

What does Morning Star Candlestick tell us?

Generally, a morning star candlestick tells us that the trend is going to reverse upwards. When the price is in a downtrend phase, most chartists forecast a further bearish continuation. So, the existing market sentiment is bearish among crypto traders. That is to say, they are either shorting financial assets or waiting for a starting bullish move. Let us explain the meaning of the morning star candlestick step by step. To explain, The formation of the first candle of the morning star obviously means that the prevailing bearish sentiment is holding on.

How to interpret the second and third days?

The second candle formation seems to be another bearish sign as it gaps down also. However, the small body of the second day may lead some investors to assume that the stock market is going to reverse soon as bears are weaker and the prices may have fallen down quite a lot for some time. In other words, it is becoming harder for bears to keep pushing this stock market down. Hence, buying pressure takes place the next third day. In fact, the bullish candle confirms that buyers have assumed authority. Thus, the exchange gaps up next to the completion of the morning star candlestick pattern confirm the forex market reversal and more investors would long the trading asset. In conclusion, the third candle occurrence is a bullish reversal signal.

How reliable is it in forex trading?

Morning star candlesticks are reliable patterns in forex trading. Nevertheless, some issues must be taken into consideration before trading morning stars. First, the last candle has better be closed upper to the midway of the first body. In other words, this indicates that the crypto market is reversing and regaining at least 50 percent of its incurred losses during the first day. Second, the body of the central candle has better be tiny. That is to say, the shorter its width, the stronger is the reversal signal. Moreover, forex traders prefer the middle session to be a bullish indecisive one. Here we talk about the Doji morning star formation, where the central candle is “Doji”. In fact, the latter pattern is the strongest ever among forex morning stars.

Besides, trading Morning Stars is very reliable in forex markets. Because price gaps rarely occur with currencies as they do with other financial assets like stocks. In fact, candlesticks forming this three-candle pattern often open near to the prior close price.

How do you use the morning star candlestick pattern in forex trading?

A Morning Star arises as a reversal pattern after a strong downtrend move on the following EURCHF H4 chart. Most traders enter a long trade at the close of the third candle. Yet, more conservative ones may postpone the entry until the price activity goes higher after the formation completion. Note that chartists can encounter a different entry price to their wishes if the exchange is highly volatile. Hence, monitoring what is happening during the session that follows the morning star pattern may act as a strong confirmation signal of the success or failure of the reversal. If the next session is bullish, it might be the time to buy low. Else, avoid trading.

There is another important note to signal. When trading volumes boost by the end of the formation, this might signal that more bulls are gathering to shift the price up. That is why every crypto, forex, or stock trader has better employ a volume tool along with any formation.

Targets and stops

The Profit Target can be set near previous consolidation areas. Whereas, Stops can be set below the most contemporary swing down created by the pattern. Because the reversal invalidates when the currency pair breaks this grade. Consequently, you may accumulate losses if you do not place stops. In short, trading the morning star candlestick pattern in the forex market requires a sound money management plan.

What is Evening star candlestick pattern ?

The evening star is a bearish reversal pattern that often occurs at the top of an upward movement in the shape of three successive candlesticks. To explain, it is the inverse of the morning star pattern and it includes:
  • First, a bullish candle indicates that bulls are still holding authority over the exchange.
  • Second, a little candle implies that buyers are losing exchange control. Because they have not caused the stock market much higher. Also, this candlestick can be bearish or bullish.
  • Third, a bearish candle that closes downer the middle point of the first candlestick. To explain, the last candle holds a strong reversal signal.
In short, an evening star pattern is the bearish counterparty of the morning star candlestick.
evening star candlestick pattern

How do you use evening Star candlestick pattern?

The trading process of the evening star candlestick is exactly the opposite of the morning star pattern. All you have to do is to detect an evening star on the trading chart with the last candle closing below the center of the first one in order to confirm the pattern. Also, you can check whether the FX volume spikes at the structure completion to confirm an assembly of sellers that would potentially shift the price down and down. Finally, initiate a short position with a stop above the most recent swing up and a target near the previous consolidation zone.

Difference between morning and evening star

Simply, an evening star is the opposite counterparty of a morning star. Hence, the differences between an evening star candlestick and a morning star candlestick pattern are:

  • The evening star is a bearish trend reveal signal. While the other is a bullish reverse sign.
  • An evening star contains a middle candlestick that peaks between two other candles by gaping up the first one and then gaping down the third session. While the morning version of the pattern includes an intermediate candlestick that gaps down the first day and then gaps up the third one.

Conclusion

Morning star candlestick pattern forms at the base of a strong downtrend move. As it is a reversal paten, it warns us that the current downtrend is reversing soon. Conversely, an evening star candlestick pattern develops at the top of a strong uptrend move. To explain, it warns us that a bearish reversal would occur soon. Chartists must analyze these morning and evening stars along with trading volumes or oscillators in order to confirm the reversal success.