Morning and Evening star reversal pattern

 A gap in a chart can give us much information.  Essentially a gap could be an entry point or an exit point. A gap down is an indication that fear and panic are on the increase. From a trader’s point of view, a gap down is a signal that warns a bottom is nearing. The trader has all the reason to anticipate a buy signal in a gap down pattern. the gap up tells us the stock price has reached a point of resistance and a sell off  is about to set in. from a traders point of view, this is ideal time to sell the holdings or go short in the market. The gap down and gap up could be noticed in a Morning star and Evening star candle patterns, which have been described below.

The eastern sky sees a morning star just before a sunrise. Since it foretells a reversal, ahead of other indicators, this pattern is known as Morning star.   

The Morning star pattern is a bullish reversal pattern. The Morning star candle pattern is a combination of three candles. The morning star candle formation can form in a downtrend. A long bearish candle on day one is followed by a short-bodied candle. This short candle should have opened in gap down. The following day that is the third day, a gap up opening seen in the form of a white candle. The closing of the third day’s candle should be above or nearer to the midpoint of the first candle. In most charts, this type of Morning star candle pattern points to a trend reversal. The reluctance in selling anticipating a trend reversal halts the price slide and drives the market upwards.

 

The evening star in the sky announces the night and darkness is nearing. The evening star too tells us the same message, that the dark days are ahead. 

The Evening star pattern is just the opposite of Morning star can pattern. This pattern too requires three candles. In an uptrend market a bearish reversal pattern with a small body appears. This candle will be a gap up candle. This candle is to be taken as a second day pattern. On the third day, another candle forms gap down and closes somewhere near the midpoint of first day’s candle. This pattern is an indication that the sellers are active in the market. The lack of buying activity could drive the price downwards, which is foretold in the form of Evening star.

 Usually the Morning and Evening star reversal patterns accompanied by large volumes, which is also supportive of the reversal trends. Both Morning star and Evening star patterns are very reliable and gives the trader an excellent opportunity to enter trade.