A morning star reversal pattern appears at a major support level or at the bottom of a downtrend, allowing for the most precise long entry. The reason for this is the zigzag movement of the financial market, which creates swing lows and swing highs.
Whenever the price returns to the swing level, it leaves clues that the current trend has ended and a new one is about to begin. The morning star pattern follows a similar logic.
It represents a market scenario in which buyers are still present at the price on Day 1. On Day 2, a negative gap opens indicating that sellers are still active and aggressive. By the end of the day, the sellers barely make a new bottom, indicating they are losing steam. New morning star patterns are appearing on the horizon for the first time. On the third candle, there is a strong bullish candle that wipes out the price action that was negative on Day 2.