Dear gentleman trader hope you all are fine today we are ready to go through this topic in detail,and I am sure it will help you a lot in expanding your market insight your knowledge and experience.
Dear gentleman are you looking for a reliable candlestick pattern? Then let me introduce you to the morning doji star. If you're planning to go long, then you want to use the morning star as the entry trigger.while the morning doji star and the evening doji star don't appear as often as other more popular candlestick patterns like the pin bar... When it does appear,there is usually a high probability that the trade will work out if you use it with the right trade setup.
S what are the right trade setup's to look for? Let's see. In this post, I will share with you what the morning doji star and evening doji star candlestick patterns are all about. I'll also share with you the psychology behind the pattern and the reason why this is considered as a strong reversal signals. And I'll share with you the right setup's to use with these patterns so that you can trade them the right way. let's begin.
What is morning doji star?
The morning doji star is a bullish three- candlestick reversal pattern. ( See pic no 1).
The first candlestick is usually a long bearish bar. The second candlestick is a doji where it opens and closes at around the same point. Sometimes it has small bullish body, and sometimes it has a small bearish body. In this, what does matter is the formation of three candlesticks. The third candlestick is what defines it as a morning doji star. And that is that it has to close above the halfway mark of the first candlestick. If it doesn't close above the halfway mark of the first candlestick bar,then we can't really consider it a morning doji star. And the reason behind is the psychology behind its close. You see,if the market closes above the halfway mark of the first candlestick, this marks a majority in the rejections of lows. If you combine the three candlestick bars together,this is what you get. (See pic no 2).
You can see that when you combine the three candlestick in the morning doji star pattern, you get a bullish pin bar! The bullish pin bar is a strong bullish candlestick pattern. Hence the morning star is a strong bullish reversal pattern when you find the right setup to trade with it.
Where to find the morning doji star:-
While the morning doji star is a bullish candlestick reversal pattern, you can find it both in a downtrend and an uptrend. (See pic 3).
The chart of picture shows a morning doji star in an uptrend. On the chart, I've also organise two exponential moving averages- the 20 EMA and 50 EMA. You can see that the market has been trading above both the EMAs, then it did a pull back and went below both EMAs. The market then formed a morning doji star pattern and the market subsequently went back up. So a morning doji star can appear in an uptrend from a pullback.
In a downtrend, the morning doji star is normally formed with a bullish reversal chart pattern. ( See pic no 4 ).
You can see in the chart 4, the morning doji star was formed together with the double bottom pattern. The double bottom is a reversal chart pattern and when you find a morning star doji at the second bortom،then it signifies a very strong bullish reversal signal.
How to trade the morning star doji:-
There are 3 ways to trade the morning doji star candlestick pattern, which are.
Trade it with a double bottom.
Trade it with a V- bottom.
Trade it with a divergence
Here are the details on each of them.
Double bottom with morning doji:-
The double bottom is a bullish reversal chart pattern. So when you combine it with the morning doji star, it gives a good opportunity to go long. (See pic no 5).
As you see in the chart 5 the example in the chart I've shown earlier, at the second bortom,there was a break below the previous swing low. It then went above the previous swing low and went up a little before coming down again. Then as it came down again, the market tried to test the previous swing low for a second time. At that point,it formed a morning doji 🌟 This signifies a rejection of lows.
What's significant is that the third bar in the morning doji star pattern went above the high of the first candlestick.this is very strong sign that there is strong buying pressure at this point. So we have a few things going on here...
First we have the market testing the previous swing low and then closing above it. This suggests that the previous swing low is a strong support level.
Second, we have the market come down to test that support level again,but failed to close below it and afterwards formed a morning doji 🌟.
Third, we have the third candlestick in the morning doji star pattern close above the first candlestick.
When you combine all these together we have a convergence of bullish signals making this a strong bullish signal. And as you can see,the market started to rally from there.
V- bottom with morning doji star:-
The next way to trade the morning doji star is with a V- bottom.
V bottom are bullish reversal chart patterns that from a V- shape,hence its name.it does not appear as often as the double bottom,and having a morning doji star appear when it forms is even rarer.
So when it does form,it can be a very good trade opportunity. However, we do not want to trade every V- bottom that appears with a morning doji star.instead, we only want to trade it if the V bottom is formed on a support level.
When the market formed the morning doji star,this indicates that the previous swing low is holding up as a strong support level.
Divergence with morning doji star:-
The last way to trade the morning doji star is with bullish divergence. To identify divergence,we use the stochastic oscillator to perform and execute this strategy of trading.
For a bullish divergence to happen, the market has to make a lower low, while stochastic oscillator has to make a higher low. And at the point where the market is making a lower low, we want to see a morning doji star formed there.
The morning doji star formation is a consequential one, because the third candlestick in its formation broke below the low of the second candlestick and then closed above the high of the first candlestick.this is a very bullish signal.
At the same time, the stochastic oscillator is showing a higher low indicating a bullish divergence.
When you combine a bullish divergence with a morning star, there a high probability that the trade will work out.
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