Morning and Evening Star Candlesticks Patterns
Morning and Evening Star Candlesticks Patterns
With continuation of the reversal candlestick patterns we have here star candlestick patterns. Star includes
1. Morning Star
2. Evening Star
3. Doji Star
4. Shooting Star
A star is a small real body that gaps away from the large real body preceding it. It is still a star as long as the star's real body does not overlap the prior real body. The color of the star is not important. Stars can occur at tops or at bottoms (it also labeled as Rain drop if it occurs in downtrend). If the star is a doji instead of a small real body, it is called a doji star.
The star, especially the doji star, is a warning that the prior trend may be ending. The star's small real body represents a stalemate in the tug of war between the bulls and bears. In a strong uptrend, the bulls are in charge. With the emergence of a star after a long green candlestick in an uptrend, it is a signal of a shift from the buyers being in control to a deadlock between the buying and selling forces. This deadlock may have occurred either because of a diminution in the buying force or an increase in the selling force. Star indicates the bulls may loose their control.
If star occurs in downtrend then same is true but reverse. That is, if a star follows a long red candlestick in a downtrend, it reflects a change in the market control. For example, during the downtrend the bears were in command but a change is seen in the advent of the star, which signals a control in which the bulls and the bears are more in equilibrium. The downward energy has thus been cooled. This is not a favorable scenario for a continuation of the bear market.
The Morning Star
The morning star is a bottom reversal pattern. Its name is derived because, like the morning star that foretells the sunrise, it presages higher prices. It is comprised of a tall, red real body followed by a small real body which gaps lower (these two lines comprise a basic star pattern). The third day is a green real body that moves well within the first period's red real body. This pattern is a signal that the bulls have seized control.
Break Down of Morning Star
The market is in a downtrend when we see a red real body. At this time the bears are in driving seat. Then a small real body appears. This means sellers are losing the capacity to drive the market lower. The next day, the strong green real body proves that the bulls have taken over. An ideal morning star would have a gap before and after the middle line's real body (that is, the star). This second gap is rare, but lack of it does not seem to vitiate the power of this formation.
The Evening Star
The evening star is the bearish counterpart of the morning star pattern. It is aptly named because the evening star appears just before darkness sets in. Since the evening star is a top reversal, it should be acted on, if it arises after an uptrend. Three lines compose the evening star. The first two lines are a long, green real body followed by a star. The star is the first hint of a top. The third line corroborates a top and completes the three-line pattern of the evening star. The third line is a red real body that moves sharply into the first periods green real body.
The Break Down Evening Star
An evening star should have a gap between the first and second real bodies and then another gap between the second and third real bodies.' However, this second gap is rarely seen and is not necessary for the success of this pattern. The main concern should be the extent of the intrusion of the third day's black real body into the first day's white real body.
Key Points about Stars
1. If there is a gap between the first candlestick's and star's real bodies and then in the star's and third candlestick's real bodies;
2. If the third candlestick closes deeply into the first candlestick's real body;
3. If there is light volume on the first candlestick session and heavy volume on the third candlestick session. This would show a reduction of the force for the prior trend and an increase in the direction force of the new trend.
The Morning and Evening Star with Doji
When a doji gaps above a real body in a rising market, or gaps under a real body in a falling market, that doji is called a doji star. Doji stars are a potent warning that the prior trend is apt to change. The session after the doji should confirm the trend reversal. Accordingly, a doji star in an uptrend followed by a long, red real body that closed well into the green real body would confirm a top reversal. Such a pattern is called an evening doji star.
The evening doji star is a distinctive form of the regular evening star. The regular evening star pattern has a small real body as its star (that is, the second candlestick), but the evening doji star has a doji as its star. The evening doji star is more important because it contains a doji.
A doji star during an uptrend is often the sign of an impending top. It is important to note that if the session after the doji star is a green candlestick which gaps higher, the bearish nature of the doji star is negated.
In a downtrend, if there is a black real body, followed by a doji star, confirmation of a bottom reversal would occur if the next session was a strong, white candlestick which closed well into the black real body. That three candlestick pattern is called a morning doji star.
This type of morning star can be a meaningful bottom. If, during a downtrend, a black candlestick gaps under the doji star, the potentially bullish implications of the doji star is voided. This is why it is important to wait for confirmation in the next session or two with doji stars.
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| Morning and Evening Star Patterns |
The Shooting Star
A shooting star is a two-line pattern that sends a warning of an impending top. It looks like its name, a shooting star. It is usually not a major reversal signal as is the evening star. The shooting star has a small real body at the lower end of its range with a long upper shadow. As with all stars, the color of the real body is not important.
The shooting star pictorially tells us that the market opened near its low, then strongly rallied and finally backed off to close near the opening. In other words, that session's rally could not be sustained. An ideal shooting star has a real body which gaps away from the prior real body.
The Shooting Star vs Inverted Hammer
A shooting star shaped candlestick after a downturn could be a bullish signal. Such a line is called an inverted hammer. It looks like a shooting star line with its long upper shadow and small real body at the lower end of the range. But, while the shooting star is a top reversal line, the inverted hammer is a bottom reversal line. As with a regular hammer, the inverted hammer is a bullish pattern after a downtrend.
The shooting star is a top reversal line, the inverted hammer is a bottom reversal line.
It is important to wait for bullish confirmation on the session following the inverted hammer. Confirmation could be in the form of the next day opening above the inverted hammer's real body. The larger the gap the stronger the confirmation. A green candlestick with higher prices can also be another form of confirmation.
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