- Forex Basics
- Japanese Candlesticks
- What Are Japanese Candlesticks?
- Bodies, Wicks and Shadows
- The Doji Candlestick Pattern
- Candlestick Engulfing Pattern
- Hammers and Hanging Man
- Piercing Pattern and Dark Cloud
- Morning Star and Evening Star
- Harami Patterns
- Shooting Star and Inverted Hammer
- The Kicker Signal
- Three White Soldiers and Three Black Crows
- Three Inside Up and Three Inside Down
- Three Outside Up and Three Outside Down
- Concealing Baby Swallow
- Upside Gap Two Crows
- Advance Block
- Three Stars In The South
- Two Crows
- Unique Three River Bottom
- Moving Averages
- Elliott Wave Theory
- Oscillators/Indicators
Morning Star and Evening Star
The Morning Star Pattern
The Morning Star Pattern is a three candle pattern at the bottom of a downtrend. This is the bull reversal opposite of the Evening Star.
The body of the first candle is black, confirming the current downtrend.
The second candle is an indecisive formation. This is the “star” of the formation and the trading range should be small for the day. It could be black or white. White is a stronger indication.
The third candle is white and should close at least halfway up the black candle.
Rules:
- The downward trend has been fairly consistent for a period of time.
- The body of the first candle is black, continuing the current trend.
- The second candle is an indecision formation. The "Morning Star".
- The third day shows evidence that the bulls have taken control. The white candle should close at least halfway up the black candle.
Signal Strengtheners:
- The longer the black candle and the white candle, first and third days, the stronger the reversal.
- The more indecision that the star day shows, the better chance that a reversal will occur.
- A Gap between the first day and the star day adds to the chance that a reversal is occurring.
- A gap before and after the star day is even more indicative of a reversal.
- The magnitude that the third day comes up into the black candle of the first day, indicates the strength of the reversal.
General Analysis:
The market trend was on its way down. The stronger the downtrend, the more investor sentiment changes to fear of the end of the trend. The sellers start getting nervous and create a large sell-off day, closing their positions. The next day the buyers start buying at the low prices. Larger volume during these days shows that ownership of the trend has changed hands. The star day does not have a large trading range as buyers and sellers are swapping positions. The third day the bulls take complete control and bears start to lose confidence. The price moves back into the trading range of the first day and the bears give up giving the bulls full control.
The Evening Star Pattern
The Evening Star Pattern is a three candle pattern at the top of an uptrend. This is the bear reversal opposite of the Morning Star.
The body of the first candle is white, confirming the current uptrend.
The second candle is an indecisive formation. This is the “star” of the formation and the trading range should be small for the day. It could be black or white. Black is a stronger indication.
The third candle is black and should close at least halfway down the white candle.
Rules:
- The upward trend has been fairly consistent for a period of time.
- The body of the first candle is white, continuing the current trend.
- The second candle is an indecision formation. This "Evening Star".
- The third day shows evidence that the bears have taken control. The black candle should close at least halfway down the white candle of the first day.
Signal Strengtheners:
- The longer the white candle and the black candle, first and third days, the stronger the reversal.
- The more indecision that the star day shows, the better chance that a reversal will occur.
- A gap between the first day and the star day adds to the chance that a reversal is occurring.
- A gap before and after the star day is even more indicative of a reversal.
- The magnitude that the third day comes down into the white candle of the first day, indicates the strength of the reversal.
General Analysis:
The market trend was on its way up. The stronger the uptrend, the more investor sentiment changes to fear of the end of the trend. The market gets overbought and the bulls are starting to take profits or sell off out of fear. The next day, the Evening Star day, the bears start to take short positions while the bulls are selling off, causing a small trading range. The third day is a large sell of day because the bulls get concerned and start jumping ship while the bears take control. If there is large volume during these days, it indicates that ownership has changed and the bears now have control.
