The Morning Star and Evening Star are patterns that are formed by 3 candlesticks. It consists of a short bodied candle, the star of either colour, between a long red and a long green candlestick. The star typically does not overlap with the preceding candle’s body, as the market gaps on the open and close.
For the Morning Star pattern, it is formed with a long bearish candle, followed by a star below it, and a bullish candle that closes within the body of the bearish candle.
For the Evening Star pattern, it is formed with a long bullish candle, followed by a star above it, and a bearish candle that closes within the body of the bullish candle.
The Morning Star and Evening Star patterns suggest the predominant pressure in the market is coming to an end, with a reversal soon to come. For example, with the Morning Star pattern, the first bearish candle suggests that the selling pressure in the market is still strong, but the star suggests an end to the selling pressure, hinting at a possible reversal. The strength of the last bullish candle confirms the transition to a stronger buying pressure, indicating a reversal of the bearish trend to a bullish trend. Similarly, the Evening Star suggests that there the buying pressure is strong, but the star indicates uncertainty in the market. Finally, the last candle confirms the transition to a bearish trend.
When one encounters a Morning Star pattern, we can buy above the last candle of the Morning Star pattern for a bullish reversal or continuation. In the case of encountering an Evening Star pattern, we can sell below the last candle of the Evening Star pattern for a bearish reversal or continuation.