Community Forex Questions
Why is the Morning Star considered a bullish reversal pattern?
The Morning Star is considered a bullish reversal pattern because it signals a potential shift in market sentiment from bearish to bullish. This pattern typically forms after a downward trend and consists of three candles:
1. First Candle (Bearish): A long bearish candle reflects strong selling pressure, continuing the existing downtrend.
2. Second Candle (Indecision): A smaller-bodied candle, such as a Doji or spinning top, indicates indecision or weakening selling momentum. It often forms with a gap down, highlighting a struggle between buyers and sellers.
3. Third Candle (Bullish): A strong bullish candle that closes well into the body of the first candle confirms the buyers' dominance and signals the reversal.
The psychology behind the pattern supports its reliability. Initially, sellers dominate the market, driving prices lower. However, during the second candle, the reduced price movement reveals diminishing bearish momentum. This pause allows buyers to regain confidence, reflected in the strong upward move of the third candle.
Traders often use additional confirmations, such as high trading volume during the third candle, proximity to support levels, or signals from indicators like RSI or MACD, to validate the pattern. The Morning Star's structure and implications make it a reliable signal for bullish reversals.
1. First Candle (Bearish): A long bearish candle reflects strong selling pressure, continuing the existing downtrend.
2. Second Candle (Indecision): A smaller-bodied candle, such as a Doji or spinning top, indicates indecision or weakening selling momentum. It often forms with a gap down, highlighting a struggle between buyers and sellers.
3. Third Candle (Bullish): A strong bullish candle that closes well into the body of the first candle confirms the buyers' dominance and signals the reversal.
The psychology behind the pattern supports its reliability. Initially, sellers dominate the market, driving prices lower. However, during the second candle, the reduced price movement reveals diminishing bearish momentum. This pause allows buyers to regain confidence, reflected in the strong upward move of the third candle.
Traders often use additional confirmations, such as high trading volume during the third candle, proximity to support levels, or signals from indicators like RSI or MACD, to validate the pattern. The Morning Star's structure and implications make it a reliable signal for bullish reversals.
Jan 17, 2025 05:02