Bullish Morning Star Candlestick
After an established downtrend, day-one is a long red day
Day-two is a short candle or Star candle.
Day-three is a blue candle
Morning Stars Start with a continuation of the bearish move. The second day sees a continuation of the move down, but a rally makes the market close at or near the open for the day. The first two candles weakly suggest a loss of bearish momentum. In fact up to day two this formation looks close to the Bullish Hammer moderate strength reversal pattern.
The Bullish Hammer alone is decent signals for a rally on day-three. But since the certainty for a Hammer indicator is low, the trend reversal should be confirmed by a blue Candlestick the next day. The higher price is able to move up on day-three, the stronger the reversal signal.
With this pattern watch for rallies the following days.
In non-FX markets gaps are quite common, and Morning Stars traditionally require a gap between the first and second day. In fact the wider the gap up from day two to three the better the signal in non-FX markets.
Since FX offer 24 hour trading, no gaps should be expected. The Forex Market version of this formation would share the same market close price on day one, and then Start day twos sell-off from there. Day twos close would be the same whether in FX or any other market restricted to fixed exchange hours, forming a candle similar to the Hammer. Thus this formation might more aptly be called Evening Hammer Star when applied to the Foreign Exchange Market.
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