3.23 Morning and Evening Stars - The Three Musketeers!

 
As we said, candlestick patterns may appear as singles, in pairs or as trios. We just looked at the lonesome cowboys and the tango artistes.  But here’s a group of three-candle patterns that seem to be inspired by The Three Musketeers – they stick together! And guess what – you’ll love their names. The first pair out of this lot is Morning and Evening Stars
 
These powerful three-candle patterns signal reversals, which may be bullish or bearish. No prizes for guessing that the bullish one is the morning star!
 

The Morning Start Candlestick Pattern

 
Morning Star candlestick pattern on a Forex chart.
 
 
The Morning Star, shown in the above trading chart, comprises a long red candle that follows from the previous downtrend, followed by a small-bodied candle whose open gaps down from the previous candle. The third candle is a power green which also opens gap-up, and whose close is above the midpoint of the first, red candle.
 
What happened here? Bearish selling continues, intensifying the downtrend, and the long red candle appears. Though everyone expects more blood on the streets, the next session has a surprise in store – it’s a small body candle, signifying the bulls and bears were quite equally matched and over all there was indecisiveness about the directions . The bears did not expect this, and the bulls are looking to charge. This happens during the next period with the long green candle, the rampaging bulls causing the bears to scamper away.
 
To summarize, the morning star pattern consists of the following:
 
  1. First candle:  A long red candle during an ongoing downtrend. This candle represents strong bearish sentiments.

     

  2. Second candle:  A very short body candle which can be either red or green, with long wicks (shadows). This candle represents sudden break in the bearish trend with indecisiveness.
  3.  

  4. Third candle: A green candle which is more than half in length of the first red candle. This candle represents a comparatively strong change in the sentiments towards upside.
 

Why the name "Morning Star"?

 
The middle candle with short body and long wicks looks like a star. This star appears towards the end of a downtrend, symbolized as night, and before the first green candle of the possible uptrend which is symbolized as the morning. Hence the name of the pattern is morning star. Please also note that during old days when the charts used to be only black & white, the downtrend candles used to be black in color and the uptrend candles used to be white.
 

The Evening Start Candlestick Pattern

 
Evening star candlestick pattern on a Forex chart. 
 
 
The Evening Star patternas shown on the above trading chart, is quite the reverse. It comprises a long green candle, a small body candle in the middle and a long red candle to complete the formation, with gapping opens just as in the morning star. The last red candle pushes down past the midpoint of the first green candle.
 

The market psychology is equally interesting.  We are in the middle of a rally in prices with bulls firmly in the saddle. A buying thrust creates the first power green candle. The next session enthusiastically opens with an upside gap, but in a comedown for the bulls, the bears manage to thwart the rise and there is no big movement. Sensing blood, bears maul the bulls the next session, creating the third, long red candle.

 

To summarize, the evening star pattern consists of the following:

 

  1. First candle:  A long green candle during an ongoing uptrend. This candle represents strong bullish sentiments.
  2.  

  3. Second candle:  A very short body candle which can be either green or red, with long wicks (shadows). This candle represents sudden break in the bullish trend with indecisiveness.
  4.  

  5. Third candle: A red candle which is more than half in length of the first green candle of the pattern. This candle represents a comparatively strong change in the sentiments towards bearishness.

 

Why the name "Evening Star"?

 
The middle candle with short body and long wicks represents a star at the end of an uptrend symbolized as day and before the beginning of the downtrend which can be symbolized as a night. Hence the name of the pattern is evening star. As we have mentioned above, in black and white trading charts the red candle is black and the green is white and hence this star appears at the end of a white candle symbolized as a day.

 

   

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