Multiple Candlestick Patterns (Part 3) – Varsity by Zerodha

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Top Highlights

• either a doji or a spinning top.

• opens with a gap

• he morning star is a bullish candlestick pattern which evolves over a three day period.

• indicates buyer’s enthusiasm.

• Unlike the single and two candlestick patterns, both the risk taker and the risk-averse trader can initiate the trade on P3 itself.

• gap up opening

• Unlike the single and two candlestick patterns, both the risk taker and the risk-averse trader can initiate the trade on P3 itself. Waiting for a confirmation on the 4th day may not be necessary while trading based on a morning star pattern.

• The lowest low in the pattern would act as a stop loss for the trade

• The morning star is a bullish candlestick pattern which evolves over a three day period. It is a downtrend reversal pattern. The pattern is formed by combining 3 consecutive candlesticks. The morning star appears at the bottom end of a downtrend. In the chart below the morning, the star is encircled.

• The evening star is a bearish equivalent of the morning star. The evening star appears at the top end of an uptrend. Like the morning star, the evening star is a three candle formation and evolves over three trading sessions.

• As a rule of thumb, the higher the number of days involved in a pattern, the better it is to initiate the trade on the same day. The stoploss for a long trade is the lowest low of the pattern. The stoploss for a short trade is the highest high of the pattern.

• long red candle

• selling acceleration.

• the bears show dominance with a gap down opening.

• Note the presence of doji/spinning top represents indecision in the market.

• a doji/spinning sets in a bit of restlessness within the bears

• that manages to close above P1’s red candle opening.

• P3 is where all the action unfolds

• look at buying opportunities in the market.

• P1 should be a blue candle