Candlestick Patterns - Morning Star / Morning Doji Star

Morning Star

Morning Star is a three candlestick bullish reversal pattern. It is found at the end of a downtrend. The first candle is a long black (or red) candle indicating a day belonging to bears where stock saw the negative price movement as per the continuing trend. Second candle is again a black candle indicating another negative day but this time body is not as long and but the shadows are long indicating indecision in the market. Third day confirms the reversal by being a white (or green) candle indicating bulls taking over control. See below.

The strength of the reversal is judged by two things. The volumes of the trade on the third day and the length of the white candle with respect to the black candle of the first day. If the white candle of the third day is reaching or going up more than the half of the first day black candle; it is considered very bullish.

Morning Doji Star

Morning Doji Star is as you can guess is similar to above pattern with only difference being the middle candle is a (black or white) Doji instead of a simple black candle. See below.

Morning Doji Star is considered a stronger bullish reversal pattern. Example of Morning Doji Star above is from the weekly chart of CNX IT Index. The Morning Doji Star was formed around August at a level of approximately 5100. Since then it had gone up to a level of 6300 (almost 25% gain) by mid October. What more can I say...

This is as far as Morning Star / Morning Doji Star. In the next post, we will see Evening Stars. In between these two... have a wonderful day.

Candlestick Patterns

I am back with Candlestick Patterns here. We have so far seen the Patterns formed by single candlesticks... Progressing further, it is now turn of Patterns created by multiple candlesticks. As I said in the previous post, these patters are stronger indicators.

Some of these popular Patterns are;

• Morning Star / Morning Doji Star
• Evening Star / Evening Doji Star
• Three White Soldiers / Three Black Crows
• Bullish / Bearish Engulfing

These comes to mind immediately. Will add more if relevant.

After getting through these Patterns, we will proceed to actual charts. Studying charts and fixing larger Patterns in the chart is a very very interesting thing and one of the mail reason I love Technical Analysis. Apart from Patterns on charts, what adds to the fun is a host of indicators and oscillators and I cannot wait to get to them.

More on above mentioned Patterns in next post.

Candlestick Patterns - Marubozu and Spinning Top

Well, I am back with few more single Candlestick Patterns. As promised, these are not twins having different names. Let's look at them before we get to multi-candlestick patterns from next post.

Marubozu is pattern characterized by absence of horns or shadow on either side. It is basically a body only candlestick. White (or Green) Marubozu indicates that after the opening price bulls took control and remained winner throughout the trading session. It is obviously considered very bullish. On the other hand a Black (or Red) Marubozu is formed when sellers remain in control after the opening bell and close the price at it's lowest level of the day... it is very bearish. See below.

Spinning Top is what we call as classic text book candlestick. It consists of a body in the middle with almost similar size shadows on both sides. It usually indicates that market is unable to decide the trend. During the day, at some point, both bulls and bears had control but by the end of the day price was closing at or near the opening level again. It kind of indicates an indecision about the further trend of the underlying and if Spinning Top appears at the end of a long uptrend/ downtrend it usually indicates an exhaustion. It indicates that a reversal in the trend may be due now.

This is most that you can get about single candlestick patterns out there. These are pretty strong patterns in their own right but still multiple (2/3) candlestick patterns are stronger indicators and we will get to them next post onward. Keep hanging man...