The morning star consists of three candlesticks:
- A long black candlestick.
- A small white or black candlestick that gaps below the close of the previous candlestick. This candlestick can also be a doji, in which case the pattern would be a morning doji star.
- A long white candlestick.
The black candlestick confirms that the decline remains in force and selling dominates. When the second candlestick gaps down, it provides further evidence of selling pressure. However, the decline ceases or slows significantly after the gap, and a small candlestick forms. The small candlestick indicates indecision and a possible trend reversal. If the small candlestick is a doji, the chances of a reversal increase. The third long white candlestick provides bullish confirmation of the reversal.
After declining from above $180 to below $120, Broadcom (BRCM) formed a morning doji star and advanced above $160 in three days. These are strong reversal patterns and do not require further bullish confirmation beyond the long white candlestick on the third day. After the advance above $160, a two-week pullback followed, and the stock formed a piecing pattern (red arrow) that was confirmed with a large gap up.
A morning doji star was followed by a strong three-day advance. This was followed by a pullback. A piercing pattern was followed by a gap up in price and the stock price advanced further.
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