The "Morning Star" pattern in trading: How to Identify a Trend Reversal? The Morning Star is a strong signal warning of a potential reversal in a downward trend in the market.
Candlestick formation: This pattern consists of three candles. The 1-st candle is bearish, the 2-nd is a short candle with a small body and a downward shadow, and the 3-rd is bullish.
Lower shadow of the 2-nd candle: Indicates that prices initially fell below the opening but then rebounded upward and closed near the opening. This forms a short candle known as the "Star."
Opening and closing of the 2-nd and 3-rd candles: The 2-nd candle closes higher than the 1-st candle's close, and the 3-rd candle closes higher than the 2-nd candle's opening.
When this pattern appears, it is recommended to refrain from buying "Down" options and wait for the situation to develop. A full-bodied bullish candle formed after the Morning Star often confirms the trend reversal. Use these signals to open long positions.
