Morning Star Candlestick Reversal Pattern
Morning star candlestick pattern is usually a bullish reversal pattern and marks an end to the downtrend. The pattern comprises three candlesticks, and one can easily spot it by looking at Bitcoin charts.
The pattern forms following a downtrend in price and signals the start of recovery. Crypto traders or stock analysts usually look for morning star pattern to place their bids at a lower price and profit from the situation.
What does morning star formation tell you?
A morning star pattern is not an indicator and is a visual pattern, meaning you don’t have to do any calculations to identify the trend reversal. However, combined with different indicators such as the Relative Strength Index (RSI), a Bitcoin trader can have a clear picture of the market situation.
The morning star candlestick formation tells you about the end of the downtrend for the underlying asset. It means if the price of a Crypto or Bitcoin was steadily falling for some time, the formation of the candle shows an end to the trend. It warns about the weakness in the downtrend and consists of three candlesticks, with the middle candlestick representing a star.
How to analyze the morning star reversal pattern?
Since the formation is visual, it doesn’t take any technicalities to spot the morning star pattern. Any Bitcoin trader can look for this reversal pattern by watching out for three candles that make a unique pattern which can be seen in the image below.
The morning star candlestick reversal pattern includes a very long bearish candle as the first sign of downtrend reversal. The long candle is usually larger than the previous candles and signals the formation of the pattern. The second candle in the pattern is smaller than the previous one and can be bullish, bearish, or neutral. It is also essential to remember that the second candle is separated from the real body of the previous candlestick.
The star signals the weakness of bears and suggests that the sellers cannot push the price to a lower low. The third candle signals reversal and the indecisive market sentiments of traders push price upwards to bag profits forming the third candle. The morning star candlestick pattern can be useful for people who prefer day trading or short-term trades. The strategy can be applied to every Cryptocurrency having strong liquidity. Below is an example of Crypto chart of Litecoin featuring morning star candlestick formation.
Trading morning star pattern and applying this strategy for Bitcoin trading is one of the easiest ways to make profits. The strategy is simple to learn and any novice trader can understand the signals on its basis. However, trading purely on visual patterns without the help of indicators can be risky. Hence, a morning star candlestick strategy works best with other support level and volume indicators.
Do you know: There is also an evening star candlestick pattern that signals a reversal in a bullish market.