Good News On The Horizon
The morning star is part of a larger family of charting techniques, called candlestick charts. These are some of the oldest tools in the industry, as they are based on techniques used by Japanese rice traders centuries ago. The basic candlestick chart consists of solid bars of white, black, blue or red, which indicate the opening and closing prices for a certain stock on a certain day. Thin lines extending out of the top or bottom of the candlestick’s body indicate the entire range of prices for which the stock sold during that trading day.
Technical analysts define the morning star as a bullish candlestick pattern consisting of a series of three candles which satisfy a set of visual requirements. First of all, the initial candlestick in the pattern needs to be a large black or red candlestick that is located inside a confirmed downtrend. The second candlestick in this pattern is a small smaller red or white candle which closes the trading day with a price that is below the first candlestick. The last candlestick in the morning star pattern is a white candle whose price opens well above the middle price point and then closes almost at the center of the first candle’s body.
When you’ve gotten more comfortable reading and interpreting the general candlestick charts, you’ll be ready to start hunting around in the data for signals and patterns that will tell you what the market has in store for your stocks. The morning star is a reversal pattern that usually means that the previous trend is about to slow, or perhaps change drastically. Just like the friends who tell you everything will be ok, when you experience a long downtrend, this signal will reassure you that your luck might be about to change.