To The Moon

This is the fifth part of a series which will show how we can use candlestick to identify bullish signal.

You can refer to the previous parts here:

Part 1/11 - How to use [Hammer Candlestick Chart] to identify Bull market

Part 2/11 - How to use [Inverse Hammer Candlestick Chart] to identify Bull market

Part 3/11 - How to use [Bullish Engulfing Candlestick Chart] to identify Bull market

Part 4/11 - How to use [Piercing line Pattern Chart] to identify Bull market

Do remember that we should never use candlestick chart alone when we trade, we also need to look out for other indicators which we are comfortable with.

In this part, I will be sharing Morning star Bullish Signal.

Here is a recap on how to read a single candlestick

How to Read a Single Candlestick

• Each candlestick represents one day’s worth of price data about a stock through four pieces of information: the opening price, the closing price, the high price, and the low price.

• The color of the central rectangle (called the real body) tells investors whether the opening price or the closing price was higher.

• A black or filled candlestick means the closing price for the period was less than the opening price; hence, it is bearish and indicates selling pressure.

• Meanwhile, a white or hollow candlestick means that the closing price was greater than the opening price. This is bullish and shows buying pressure.

• The lines at both ends of a candlestick are called shadows, and they show the entire range of price action for the day, from low to high. The upper shadow shows the stock’s highest price for the day, and the lower shadow shows the lowest price for the day.

Morning Star Bullish Signal

When a bullish reversal pattern occurs at the bottom of a downtrend, we would see the morning star formation.

Similarly to other candlestick patterns, it only give us a signal to show a potential reversal, but we should always confirm it with other indicators.

Normally traders would look out for a gap down but there is 4 points rules that we can use to check if it is a valid morning star pattern. (more will be shared in the section).

The most important candle is the second candle. This candle can be bearish or bullish.

The focus is on indecisiveness and uncertain outcome as to whether bull or bear will come out on top. 

How do we identify the Morning star formation

I would look for these 4 points to help me to identify a Morning star formation.

1. Since a morning star is a bullish reversal pattern, there must be a downtrend already in place

2. We should see the first candle as a bearish candle, preferably longer

3. As the bulls and bears start to balance out over the session, we should see a indecisive second candle

4. ​We should have a strong bullish candle for the third candle and this should give the confirmation of the reversal

I would use $Tesla Motors(TSLA)$ as an example to look at the Morning star candlestick pattern and see if it is true.

Tesla Motors (TSLA) - 07-08 June 2023

If we look at the chart closely, we can see the sellers have failed to force a close near the session’s low on 07-08 June.

The price rebounds higher to create a doji candle which indicate the indecisiveness among the buyers and sellers.

But the next candle show a long bullish candle which eventually forms the morning star pattern.

So we are almost certain that bullish reversal for TSLA is about to start taking place.

Summary

The morning star candlestick chart is only one of the method you can see if there will be a bullish signal for a particular stocks.

It need to be used with other indicators or technical analysis. But for a start, we can use it to sense the market.

You can try to see if you are able to use this pattern to determine any stocks that is starting its bullish trend.

Appreciate if you could share your thoughts in the comment section whether you use ‘morning star’ and find it useful in your trading journey?

@TigerStars @Daily_Discussion appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.