Daily Digest:
w/c 17 June 2024: The US data highlight this week is Retail Sales on Tuesday, with global Flash PMI data on Wednesday. Plus on the central bank side we get the RBA, PBoC, SNB and BoE all in play

Morning Star Patterns Explained


A Morning Star is a three candlestick pattern that signals a key turning point in the market. It occurs when a decisive downtrend of selling pressure meets a point of exhaustion. This proves to be the key low of the trend. With the selling exhausted, the market then swings back higher for the start of a new positive trend.

Morning Star

There is an exhaustion gap down for Candle 2. This is important because it comes as a wave of opening sell orders hits the market. However, the move then fizzles out as the sell-off runs out of steam. This then forms a consolidation for Candle 2. A gap higher for the OPEN of Candle 3 signals a decisive shift to a more positive market sentiment. This starts the possibility of the set-up forming a Morning Star. A strong move higher in Candle 3 then completes the pattern. The opposite of the Morning Star is the Evening Star. This is a bearish candlestick set-up signalling the beginning of a new selling phase.

Morning star pattern
Morning Star
Price actionA three candlestick set-up that signals the end of a downtrend phase.Candle 1: A strong bearish candle, OPEN towards the HIGH of the session, with the CLOSE towards the LOW.Candle 2: The price OPEN is a gap down to a new low. The price then consolidates, ideally with the CLOSE above the OPEN.Candle 3: A gap higher at the OPEN begins a strong positive move. The OPEN is around the LOW of the session and the CLOSE towards the HIGH.
Morning Star types:Morning Star (classic) The CLOSE price of the second candle is slightly higher than the OPEN. This leaves a small positive move for Candle 2, even if the CLOSE of Candle 2 is below the CLOSE of Candle 1. The gap down in Candle 2 and then gap back higher in Candle 3 are very similar. The HIGH/LOW ranges of Candles 1 & 3 are also very similar.
 Morning Star (imperfect) Some variations would leave an imperfect Morning Star pattern. This includes conditions such as: Candle two may have a large rangeThe two gaps might vary in size.The real bodies of Candlesticks 1 & 3 may vary in size.There may be long shadows on Candlesticks 1 & 3.
 Morning Doji Star Candle 2 is a doji. The gap down at the OPEN then consolidates with only small fluctuations throughout the session. The CLOSE of Candle 2 is then the same as the OPEN of Candle 2.
 Bullish Abandoned Baby This is one step further than the Morning Doji Star. The HIGH Candle 2 is below the LOW of Candle 1. The gap higher for Candle 3 is entirely above Candle 2 leaving an unfilled gap higher as the market swings decisively higher. This is said to have left Candle 2 entirely abandoned by the price action of Candles 1 & 3.
PsychologyThe price has accelerated lower, with a final exhaustion gap.This proves to be the final act of selling before the market swings back higher again.
ConfirmationOnly after the strong CLOSE higher of Candle 3 can confirmation be seen.
High ConvictionThe CLOSE of Candle 3 is above the OPEN of Candle 1.
Lower ConvictionSee above for conditions of the imperfect Morning Star.Additionally, if the market has not been in a strong downtrend before the Morning Star this reduces the conviction in the turn higher.
Potential Stop-LossThe Morning Star is seen as a key low in the downtrend. Stop-losses should therefore be placed below the LOW of Candle 2.


Richard is an independent market analyst with over 20 years of experience working for brokers in London. Most recently he has worked with Hantec Markets and Infinox, focusing on trading education, ana... Continued

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