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3.
The third
bar is a largish bear candle. The third candle should close at least more than the halfway down the first candle [large bull candle] We need to wait until third
candle closes to see if it's a valid evening star or not.
Morning Doji Star Candle
Pattern
Same as above.. only difference is that second candle formed as doji rather than hammer like.
Evening Doji Star Candle Pattern
Same as above.. only difference is that second candle formed as doji rather than hammer like.
Some says
morning and evening stars can have more than 3 candles as illustrated below. I'll try to stick with the basic definitions rather than complicating things.
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Important aspect to remember morning/evening star candle patterns carries much more weight they form in and around
the supply and demand zones, like other reversal
candle patterns.
Don't mix the chart patterns with candle patterns. Once I have gone through important candle patterns I'll move in to explore chart patterns.
Lets check real charts and see
how these morning and evening stars looks like on them.
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Morning Star
A very nice looking morning star. If the third bar wasn't quite large it'd would have been even more nicer. We are in daily down-trend. We have our large bear candle [1], then
hammer look a like bar with a long lower wick [2], and finally [3] we have our bull candle which is more than half of first candle [bear] body, we have our pattern completion
bull candle.
When we see such large bars [candle number 3 in this case], sometimes it pays much better if we wait and enter on retracement. More often than not after
large bars we
usually see some retracement. Most likely there will be some quick profit taking and re-loading take place. However, in news and unexpected events times the above will not
apply as described. In such times price can move very fast 100+ pips in one direction without any retracement.. Extreme greed or panic would be the story of the day.
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Another example of a good looking
morning star
candlestick pattern. Daily down-trend, largish
bear bar, spinning top then to complete the pattern ample bull bar.
Additionally, new demand zone established on completion of the pattern.
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What about the formation at the top? Candles highlighted with dotted yellow box. Would you consider it as evening star? All good except the second candle doesn't look like a
hummer with long upper wicks or doji but it looks like a bear spinning top candle. Well, in this case it wouldn't be much of an issue as we lookto the left and see the price
action and price hitting a fresh supply zone and bouncing from it nicely.
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