Forex Questions and Answers - FXAnswer

Bullish morning star candlestick is a bullish pattern with a long black day followed by a small day that gaps in the direction of the trend. The third day is a white day which closes in the top half of the black day.

In a downtrend or during a pullback within an uptrend, the market gaps down but enough buyers step in to halt the weakness. The lack of ability of the bears to press the issue indicates the downtrend may be weakening. The gap up and rally that closes the white day above the top half of the black day confirms the reversal if accomplished with a surge in volume.

The bullish Morning Star is similar to the bullish Morning Doji Star, bullish Abandoned Baby, and bullish Doji Star and could be a continuation of the bullish Inverted Hammer.

Source(s):

http://www.leavittbrothers.com/education/ candlestick_patterns/bull/ morning_star_bullish.cfm

The bullish morning star pattern can occur in a number of different contexts (e.g. at the beginning of a trend, during a trend, at the end of a trend, etc.), but it is most relevant when it occurs during a significant downward trend. The bullish morning star pattern is a bullish pattern, and can be used as an indication of the end of a downward trend. The bullish morning star pattern is somewhat similar to some of the other three candlestick patterns, but once the differentiating aspects are understood, the pattern is relatively easy to identify on a price chart.

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.

Although the example above appears red, day-two star candles can really be any color.

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.

Source(s):

fxwords.com

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. Although the example above appears red, day-two star candles can really be any color. 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.