The morning doji star reversal pattern It is made up of a bearish candle, a doji candle and a bullish candle. and indicates a change from a bearish market to a bullish one.
Therefore, we are looking at a Japanese candlestick pattern used in technical analysis. Although there is a similar one, the morning star, in this case the central small candle is a doji and this means that it has no body (see figure).
Once again, we are facing changes in the price trend, which had been decreasing and are beginning to increase. These patterns are very important in trading, since we must take the appropriate position when they appear.
Operation of the morning doji star pattern
Its operation is similar to that of the morning star, although in this case it is even more reliable. In this way, in the morning doji star pattern, there is a bearish market in which the selling force pressures prices to reduce, due to the increase in supply.
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Then a buying interest begins to take place, which is what causes these changes in trend. Keep in mind that the ideal is to have a gap (temporary absence of price) on both sides of the doji-type candle.
Characteristics of the morning doji star pattern
Let’s see some of its most relevant characteristics (see figure):
- First of all, the market has to be bearish, that is, the prices must present a downward trend.
- On the other hand, the first candle of the pattern is bearish, indicating the proximity of that reversal.
- Next, a doji candlestick (without body) should appear. This is easy to see and this makes the interpretation of this pattern easy.
- A bullish candle confirms the change in trend.
- As always in trading, it is advisable to use other indicators such as the relative strength index (RSI) that gives us information about the buying or selling forces.
Trade this pattern
To operate with this pattern, it is advisable to follow steps similar to those that were given in the morning star and which are the following:
- First of all, you have to be clear about what a stop loss is. This is nothing more than an order conditional on the price not falling below a limit that we establish. That is why it is essential here, as we know that this pattern predicts a change in trend.
- Thus, this order must be placed below the closing price of the doji candlestick (which coincides with the opening price). This way, the order will be executed when the trend changes.
- On the other hand, in a morning doji star pattern, you have to take into account the resistances, which would be the top price (maximum) in which the chart seems to move. The reason is that once it reaches it, a new change in trend is expected.