Thursday, May 04, 2006

Forex Reversal Signs - Bullish Candlestick Formation

Japanese Candlesticks - The Morning Star

Continuing our look at Japanese candlesticks, and with an emphasis on real life examples, today we will look at a “Morning Star” formation.
A “Morning Star” is found at the bottom of a downward movement and is similar in appearance to our “Shooting Star” previously mentioned – So it is a BULLISH reversal sign. The main difference is that our Morning Star is HOLLOW.

We are looking for a three candlestick pattern. The first candlestick should be bearish (filled in) and be part of a previous or current downward move. Our “Morning Star” appears next and is “hollow” - Preferably it should gap below the close of the first candlestick. That is the CLOSE of the Morning star should be below the close of the first candlestick. The third candlestick in our formation should be bullish – hollow - and close halfway into our first candlestick.
The scenario written above is the IDEAL. However as you see from our screenshots you have to adapt the theory to the real world - As, in forex charts, perfect gapping is a fairly rare occurrence.

That's all for today, have fun!
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