Morning Star Evening Star Candlestick: Three-Bar Reversals

Key Takeaways

• A morning star has three candles: a long trend candle, a small-bodied star in the middle, and a long reversal candle that closes above the first candle's midpoint.
• Bulkowski's tests rank the morning star as a bullish reversal roughly 78 percent of the time, making it among the higher-performing candlestick patterns.
• A common mistake is treating a two-candle setup as a star; the indecision middle candle is essential and cannot be skipped.
• The third candle closing above the midpoint of the first is the key threshold; partial closures produce weaker and less reliable reversal signals.

What It Is

A morning star consists of three candles in sequence. The first is a long bearish candle that continues the existing downtrend. The second is a small-bodied candle, often a doji or spinning top, that gaps down from the first. The third is a long bullish candle that closes well into the body of the first candle, ideally above its midpoint.

An evening star is the mirror image at the top of an uptrend. First a long bullish candle, then a small-bodied star that gaps up, then a long bearish candle that closes well into the body of the first.

The middle candle is the star. Its small body represents a pause, a moment where the trend loses steam. The third candle confirms that the opposing side has taken control.

The Intuition

Strong trends do not usually turn in a single session. They slow first, pause, and then reverse. The three candles of a star pattern walk through that sequence.

The long first candle shows the trend still has momentum. The small star shows momentum fading. The long third candle shows the other side stepping in decisively. A morning star tells the story of sellers exhausting themselves, then buyers taking over. An evening star tells the same story with the roles reversed.

Steve Nison popularized the pattern in Western markets in 1991 and considered stars among the more reliable of the traditional reversal setups. Thomas Bulkowski's statistical work supports that reputation. His tests rank the morning star as a bullish reversal roughly 78 percent of the time, placing it among the higher-performing candlestick patterns in his sample.

How It Works

The standard rules hold for both versions.

• A clear prior trend is required. A morning star needs a visible downtrend. An evening star needs a visible uptrend.
• The first candle is long and in the direction of the existing trend.
• The second candle has a small real body. A doji middle candle strengthens the pattern. The body should gap away from the first candle in the direction of the trend, though in modern markets that gap is often small.
• The third candle opens near the star and closes deep into the body of the first candle. Closing above the midpoint of the first candle is the traditional threshold.
• Ideally the third candle also gaps from the star in the new direction, though gaps are rare in 24-hour markets like futures and FX.
• Volume expansion on the third candle strengthens the case. A confirming candle on heavy volume suggests genuine shift in control.

The strict gap requirements are sometimes relaxed on daily charts of actively traded assets where overnight price behavior is muted. In practice most traders accept small overlaps as long as the three-body shape is clear.

Worked Example

Morning star scenario. XYZ has declined from 90 to 72 over four weeks.

• Day 1: opens at 74.00, closes at 72.50. Long red candle continuing the downtrend.
• Day 2: opens at 72.00 (small gap down), trades between 71.40 and 72.60, closes at 71.90. Small-bodied candle, essentially a doji.
• Day 3: opens at 72.30, rallies all session, closes at 74.20 on volume 50 percent above average.

The close on day 3 sits well above the midpoint of day 1's body, which was roughly 73.25. The three candles together form a textbook morning star. Traders would typically wait for a follow-through close above day 3's high before adding to or initiating a long position.

The evening star runs the same play with the colors reversed at the top of an uptrend.

Common Mistakes

1. Calling a two-candle setup a star. The middle candle is the whole point. A long red bar followed directly by a long green bar is not a morning star. It might be a bullish engulfing, but the star structure specifically requires that three-body sequence with indecision in the middle.

2. Ignoring the depth of the third candle. If the third candle only closes marginally into the body of the first, the reversal signal is weak. Nison and Bulkowski both emphasize that closing above the midpoint of the first candle is what gives the pattern its power.

3. Treating every small middle candle as good enough. The smaller the middle body, the stronger the signal. A doji star is more reliable than a spinning top star, which is more reliable than a merely slightly smaller candle. Gradations matter.

4. Skipping confirmation. A completed morning or evening star is a setup, not a guarantee. Waiting for one more candle in the reversal direction before committing size reduces false signals.

5. Forcing the pattern on short timeframes. On intraday charts, three-candle sequences appear constantly. Stars gain real weight on daily, weekly, or higher timeframes where each candle represents a genuine session.

Frequently Asked Questions

Q: What is a morning star evening star candlestick in simple terms? A morning star is a three-candle pattern where a long bearish candle is followed by a small indecision candle, then a long bullish candle that closes deep into the first candle, signaling a bottom reversal. The evening star is the mirror at a top.

Q: How does a morning star evening star candlestick affect investment decisions? It gives a structured entry after a trend reversal: a long position after a morning star confirmation, with a stop below the pattern's lowest low and a target at a prior resistance level, providing a risk-defined way to buy at a potential bottom.

Q: What is a real-world example of a morning star candlestick? After XYZ falls from 90 to 72 over four weeks, it prints a long red candle, then a small doji near 71.90, then a bullish close at 74.20 on above-average volume, the third candle closing well above the midpoint of the first. That three-candle sequence is a textbook morning star.

Q: How can investors use morning star and evening star patterns practically? Always require the third candle to close above the midpoint of the first candle (for morning star), and wait for a follow-through day before committing size. One rule: if the third candle closes below the first candle's midpoint, the setup is too weak to trade.

Q: How is a morning star different from a bullish engulfing pattern? A bullish engulfing is a two-candle pattern where the second candle's body fully swallows the first. A morning star is a three-candle pattern with a critical indecision middle candle that separates the trend move from the reversal. The star pattern shows a more gradual momentum shift than the immediate takeover in an engulfing.

Sources

1. StockCharts ChartSchool. "Candlestick Bullish Reversal Patterns." https://chartschool.stockcharts.com/table-of-contents/chart-analysis/candlestick-charts/candlestick-bullish-reversal-patterns
2. StockCharts ChartSchool. "Candlestick Bearish Reversal Patterns." https://chartschool.stockcharts.com/table-of-contents/chart-analysis/candlestick-charts/candlestick-bearish-reversal-patterns
3. Bulkowski, T. "Morning Star Candle Pattern." https://thepatternsite.com/MorningStar.html
4. Nison, S. (1991). Japanese Candlestick Charting Techniques. New York Institute of Finance. https://store.stockcharts.com/products/japanese-candlestick-charting-techniques-2nd-edition

Disclaimer

This article is educational content only and is not financial advice. Nothing here is a recommendation to buy, sell, or hold any security. Consult a licensed advisor before making investment decisions.