{"id":17301,"date":"2022-01-21T19:09:15","date_gmt":"2022-01-21T19:09:15","guid":{"rendered":"https://www.5paisa.com/finschool/?post_type=markets\u0026#038;p=17301"},"modified":"2025-12-23T15:56:36","modified_gmt":"2025-12-23T10:26:36","slug":"multiple-candlestick-pattern-part-3","status":"publish","type":"markets","link":"https://www.5paisa.com/finschool/course/technical-analysis-course/multiple-candlestick-pattern-part-3/","title":{"rendered":"Multiple Candlestick Pattern-Part 3"},"content":{"rendered":"\u003cdiv data-elementor-type=\u0022wp-post\u0022 data-elementor-id=\u002217301\u0022 class=\u0022elementor elementor-17301\u0022\u003e\u003csection class=\u0022elementor-section elementor-top-section elementor-element elementor-element-23ba90b elementor-section-full_width tab_container elementor-section-height-default elementor-section-height-default\u0022 data-id=\u002223ba90b\u0022 data-element_type=\u0022section\u0022\u003e\u003cdiv class=\u0022elementor-container 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data-title-link=\u0022study-tab\u0022\u003e\u003cp\u003e\u003cdiv class=\u0027white\u0027 style=\u0027background:rgb(255, 255, 255); border:solid 0px rgb(255, 255, 255); border-radius:0px; padding:0px 0px 0px 1px;\u0027\u003e\u003cdiv id=\u0027text_slider\u0027 class=\u0027owl-carousel sa_owl_theme owl-pagination-true\u0027 data-slider-id=\u0027text_slider\u0027 style=\u0027visibility: visible;visibility:visible;\u0027\u003e\u003cdiv id=\u0027text_slider_slide01\u0027 class=\u0027sa_hover_container\u0027 data-hash=\u0027The-Gaps\u0027 style=\u0027padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:400px; \u0027\u003e\u003ch2 style=\u0022text-align: left\u0022\u003e\u003cspan style=\u0022color: #000000\u0022\u003e\u003cstrong\u003e10.1 \u003c/strong\u003e\u003c/span\u003e\u003cstrong\u003e\u003cb\u003eThe Gaps\u003c/b\u003e\u003c/strong\u003e\u003c/h2\u003e\u003cp\u003e\u003cimg fetchpriority=\u0022high\u0022 decoding=\u0022async\u0022 class=\u0022aligncenter wp-image-76133 size-full\u0022 src=\u0022https://www.5paisa.com/marathi/finschool/wp-content/uploads/2022/01/The-Gaps.png\u0022 alt=\u0022The Gaps\u0022 width=\u0022442\u0022 height=\u0022377\u0022 srcset=\u0022https://www.5paisa.com/marathi/finschool/wp-content/uploads/2022/01/The-Gaps.png 442w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/The-Gaps-300x256.png 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/The-Gaps-50x43.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/The-Gaps-100x85.png 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/The-Gaps-150x128.png 150w\u0022 sizes=\u0022(max-width: 442px) 100vw, 442px\u0022 /\u003e\u003c/p\u003e\u003cp\u003eIn this chapter we will discuss the remaining two candlestick pattern i.e Morning Star and Evening star candlestick pattern. But before we begin with this , we need to understand two common price behaviors –gap up opening and gap down opening.\u003c/p\u003e\u003cp\u003eA gap occurs when the stock opens different from the previous day close. This creates a visible gap between two candlesticks on daily chart. If the stock opens higher than its previous close it is called gap up and if it opens lower its a gap down.\u003c/p\u003e\u003cp\u003eWell , these gaps aren’t random. They often reflect strong overnight reactions to news which can be either positive or negative, earnings or global events. Traders who couldn’t act after market hours rush in the next morning, which causes the prices to jump or drop sharply at the open.\u003c/p\u003e\u003cp\u003eIt is very important to understand the gaps because patterns like morning star and evening star often begins with one. They help us spot potential reversals and shifts in market sentiment especially when combined with candlestick formations.\u003c/p\u003e\u003cp\u003e\u003cstrong\u003e\u003cb\u003eGap Up opening \u003c/b\u003e\u003c/strong\u003e\u003c/p\u003e\u003cp\u003eA Gap up Opening occurs when a stock opens higher than the previous day close creating a visible gap between the two candlestick on daily chart. This typically reflects bullish sentiments that builds up after market hours due to factors like positive news , strong global cues or institutional buying and signals that traders are willing to pay a premium to enter positions early, often anticipating upward momentum right from the start of the trading sessions.\u003c/p\u003e\u003cp\u003e\u003cstrong\u003eFor example observe the two charts below\u003c/strong\u003e\u003c/p\u003e\u003cfigure id=\u0022attachment_76277\u0022 aria-describedby=\u0022caption-attachment-76277\u0022 style=\u0022width: 2778px\u0022 class=\u0022wp-caption aligncenter\u0022\u003e\u003cimg decoding=\u0022async\u0022 class=\u0022wp-image-76277 size-full\u0022 src=\u0022https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-2-Chapter-10.png\u0022 alt=\u0022Image 2 Chapter 10\u0022 width=\u00222788\u0022 height=\u00221172\u0022 srcset=\u0022https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-2-Chapter-10.png 2788w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-2-Chapter-10-300x126.png 300w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-2-Chapter-10-1024x430.png 1024w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-2-Chapter-10-768x323.png 768w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-2-Chapter-10-1536x646.png 1536w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-2-Chapter-10-2048x861.png 2048w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-2-Chapter-10-50x21.png 50w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-2-Chapter-10-100x42.png 100w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-2-Chapter-10-150x63.png 150w\u0022 sizes=\u0022(max-width: 2788px) 100vw, 2788px\u0022 /\u003e\u003cfigcaption id=\u0022caption-attachment-76277\u0022 class=\u0022wp-caption-text\u0022\u003eImage source : Trading view\u003c/figcaption\u003e\u003c/figure\u003e\u003cfigure id=\u0022attachment_76276\u0022 aria-describedby=\u0022caption-attachment-76276\u0022 style=\u0022width: 1382px\u0022 class=\u0022wp-caption aligncenter\u0022\u003e\u003cimg decoding=\u0022async\u0022 class=\u0022wp-image-76276 size-full\u0022 src=\u0022https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-1-Chapter-10.png\u0022 alt=\u0022Image 1 -Chapter 10\u0022 width=\u00221392\u0022 height=\u0022604\u0022 srcset=\u0022https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-1-Chapter-10.png 1392w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-1-Chapter-10-300x130.png 300w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-1-Chapter-10-1024x444.png 1024w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-1-Chapter-10-768x333.png 768w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-1-Chapter-10-50x22.png 50w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-1-Chapter-10-100x43.png 100w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-1-Chapter-10-150x65.png 150w\u0022 sizes=\u0022(max-width: 1392px) 100vw, 1392px\u0022 /\u003e\u003cfigcaption id=\u0022caption-attachment-76276\u0022 class=\u0022wp-caption-text\u0022\u003eImage source : Trading view\u003c/figcaption\u003e\u003c/figure\u003e\u003cp\u003e\u0026nbsp;\u003c/p\u003e\u003cp\u003eIf you observe both the charts above, on 9\u003csup\u003eth\u003c/sup\u003e May 2025 Nifty 50 Index closed at 24008.00 and the next working day was 12\u003csup\u003eth\u003c/sup\u003e May 2025 Nifty 50 Index opened at 24,420.10. So Why there was a price difference?\u003c/p\u003e\u003cp\u003eThe gap up opening on 12th May 2025, where Nifty 50 opened at 24,420.10 after closing at 24,008.00 on 9th May, was driven by a surge in positive sentiment over the weekend. Here’s what contributed to that price jump:\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cb\u003e\u003c/b\u003e\u003cstrong\u003e\u003cb\u003eGeopolitical Relief\u003c/b\u003e\u003c/strong\u003e\u003cstrong\u003e\u003cb\u003e: \u003c/b\u003e\u003c/strong\u003eOn May 10th, India and Pakistan agreed to a ceasefirefollowing heightened tensions due to an April 22 terror attack in Pahalgam. This news significantly reduced uncertainty in the region.\u003c/li\u003e\u003cli\u003e\u003cb\u003e\u003c/b\u003e\u003cstrong\u003e\u003cb\u003eInvestor Optimism\u003c/b\u003e\u003c/strong\u003e\u003cstrong\u003e\u003cb\u003e: \u003c/b\u003e\u003c/strong\u003eThe halt in cross-border firing and announcement of DGMO-level talks created a sense of stability. Investors responded by positioning for a bullish open on Monday.\u003c/li\u003e\u003cli\u003eGlobal Market Support: Asian and European markets were trading higher, and GIFT Nifty futures surged by 400–450 points, signaling a strong start for Indian equities.ones can trigger gap openings.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003eIt also reinforces the idea that gaps often reflect overnight sentiment shifts, not just technical setups.\u003c/p\u003e\u003cp\u003e\u003cstrong\u003e\u003cb\u003eGap down opening\u003c/b\u003e\u003c/strong\u003e\u003c/p\u003e\u003cp\u003eIt is very similar to Gap up opening. In case of gap down opening bears are more enthusiastic. They are eager to sell lower than the previous days close because they are willing to get rid of the stock somehow because of the negative news. Lets understand with an example\u003c/p\u003e\u003cfigure id=\u0022attachment_76279\u0022 aria-describedby=\u0022caption-attachment-76279\u0022 style=\u0022width: 2778px\u0022 class=\u0022wp-caption aligncenter\u0022\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022wp-image-76279 size-full\u0022 src=\u0022https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-4-Chapter-10.png\u0022 alt=\u0022Image 4 -Chapter 10\u0022 width=\u00222788\u0022 height=\u00221184\u0022 srcset=\u0022https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-4-Chapter-10.png 2788w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-4-Chapter-10-300x127.png 300w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-4-Chapter-10-1024x435.png 1024w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-4-Chapter-10-768x326.png 768w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-4-Chapter-10-1536x652.png 1536w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-4-Chapter-10-2048x870.png 2048w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-4-Chapter-10-50x21.png 50w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-4-Chapter-10-100x42.png 100w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-4-Chapter-10-150x64.png 150w\u0022 sizes=\u0022(max-width: 2788px) 100vw, 2788px\u0022 /\u003e\u003cfigcaption id=\u0022caption-attachment-76279\u0022 class=\u0022wp-caption-text\u0022\u003eImage source : Trading view\u003c/figcaption\u003e\u003c/figure\u003e\u003cfigure id=\u0022attachment_76280\u0022 aria-describedby=\u0022caption-attachment-76280\u0022 style=\u0022width: 1382px\u0022 class=\u0022wp-caption aligncenter\u0022\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022wp-image-76280 size-full\u0022 src=\u0022https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-5-Chapter-10.png\u0022 alt=\u0022Image 5 -Chapter 10\u0022 width=\u00221392\u0022 height=\u0022604\u0022 srcset=\u0022https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-5-Chapter-10.png 1392w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-5-Chapter-10-300x130.png 300w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-5-Chapter-10-1024x444.png 1024w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-5-Chapter-10-768x333.png 768w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-5-Chapter-10-50x22.png 50w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-5-Chapter-10-100x43.png 100w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-5-Chapter-10-150x65.png 150w\u0022 sizes=\u0022(max-width: 1392px) 100vw, 1392px\u0022 /\u003e\u003cfigcaption id=\u0022caption-attachment-76280\u0022 class=\u0022wp-caption-text\u0022\u003eImage source : Trading view\u003c/figcaption\u003e\u003c/figure\u003e\u003cp\u003e\u0026nbsp;\u003c/p\u003e\u003cp\u003eJust observe both the charts. On 3\u003csup\u003erd   \u003c/sup\u003eOctober 2024 the Nifty 50 closed at 25,250.10 and the very next day i.e on 4\u003csup\u003eth\u003c/sup\u003e October 2024 the Nifty 50 opened at 25181.90 which is below the closing price of previous day. You can see here a visible gap between the closing and opening prices. Now lets understand why there was a gap on these days.\u003c/p\u003e\u003cp\u003e\u003cstrong\u003e\u003cb\u003eHere’s what triggered the move:\u003c/b\u003e\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cb\u003e\u003c/b\u003e\u003cstrong\u003e\u003cb\u003eGeopolitical Tensions:\u003c/b\u003e\u003c/strong\u003eRising conflict between Iran and Israel created global uncertainty, prompting risk-off behavior across markets. This was a major sentiment dampener for Indian equities.\u003c/li\u003e\u003cli\u003e\u003cb\u003e\u003c/b\u003e\u003cstrong\u003e\u003cb\u003eMassive Wealth Erosion:\u003c/b\u003e\u003c/strong\u003eThe Indian stock market saw a ₹10 lakh crore wipeout in investor wealth during that week, with Nifty correcting nearly 1,000 points from its\u003c/li\u003e\u003cli\u003e\u003cb\u003e\u003c/b\u003e\u003cstrong\u003e\u003cb\u003eAggressive FII Selling: \u003c/b\u003e\u003c/strong\u003eForeign Institutional Investors (FIIs) sold nearly $2 billion worth of Indian equities, intensifying the downward pressure\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003e\u003cem\u003e\u003cb\u003e\u003ci\u003eSome Activity For You\u003c/i\u003e\u003c/b\u003e\u003c/em\u003e\u003c/strong\u003e\u003c/p\u003e\u003cfigure id=\u0022attachment_76281\u0022 aria-describedby=\u0022caption-attachment-76281\u0022 style=\u0022width: 2398px\u0022 class=\u0022wp-caption aligncenter\u0022\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022wp-image-76281 size-full\u0022 src=\u0022https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-6-Chapter-10.png\u0022 alt=\u0022Image 6 -Chapter 10\u0022 width=\u00222408\u0022 height=\u00221072\u0022 srcset=\u0022https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-6-Chapter-10.png 2408w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-6-Chapter-10-300x134.png 300w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-6-Chapter-10-1024x456.png 1024w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-6-Chapter-10-768x342.png 768w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-6-Chapter-10-1536x684.png 1536w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-6-Chapter-10-2048x912.png 2048w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-6-Chapter-10-50x22.png 50w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-6-Chapter-10-100x45.png 100w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-6-Chapter-10-150x67.png 150w\u0022 sizes=\u0022(max-width: 2408px) 100vw, 2408px\u0022 /\u003e\u003cfigcaption id=\u0022caption-attachment-76281\u0022 class=\u0022wp-caption-text\u0022\u003eImage source : Trading view\u003c/figcaption\u003e\u003c/figure\u003e\u003cp\u003eThe chart shows a visible gap down in price around May 2022, followed by a recovery in the weeks ahead.\u003c/p\u003e\u003cp\u003eQuestion: If you\u0026#8217;re a trader and you observe this gap followed by rising volume and price recovery, what could be a thoughtful next step?\u003c/p\u003e\u003cul\u003e\u003cli\u003eA) Assume the gap will never be filled\u003c/li\u003e\u003cli\u003eB) Monitor for a potential gap-fill and bullish continuation\u003c/li\u003e\u003cli\u003eC) Enter a short position immediately\u003c/li\u003e\u003cli\u003eD) Ignore the gap—it has no significance\u003c/li\u003e\u003c/ul\u003e\u003cp\u003eCorrect Answer: B) Monitor for a potential gap-fill and bullish continuation Why: Gaps often act as support/resistance zones. If price begins to recover with volume, it may attempt to fill the gap, offering a potential bullish setup.\u003c/p\u003e\u003cp\u003e\u0026nbsp;\u003c/p\u003e\u003c/div\u003e\u003cdiv id=\u0027text_slider_slide02\u0027 class=\u0027sa_hover_container\u0027 data-hash=\u0027Morning-Star\u0027 style=\u0027padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:400px; \u0027\u003e\u003ch2 style=\u0022text-align: left\u0022\u003e\u003cspan style=\u0022color: #000000\u0022\u003e\u003cstrong\u003e10.2 \u003c/strong\u003e\u003c/span\u003e\u003cstrong\u003e\u003cb\u003eMorning Star\u003c/b\u003e\u003c/strong\u003e\u003c/h2\u003e\u003cp\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022aligncenter wp-image-76134 size-full\u0022 src=\u0022https://www.5paisa.com/marathi/finschool/wp-content/uploads/2022/01/Morning-Star.png\u0022 alt=\u0022Morning Star\u0022 width=\u0022472\u0022 height=\u0022417\u0022 srcset=\u0022https://www.5paisa.com/marathi/finschool/wp-content/uploads/2022/01/Morning-Star.png 472w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/Morning-Star-300x265.png 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/Morning-Star-50x44.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/Morning-Star-100x88.png 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/Morning-Star-150x133.png 150w\u0022 sizes=\u0022(max-width: 472px) 100vw, 472px\u0022 /\u003e\u003c/p\u003e\u003cp\u003eThe Morning Star Candlestick Pattern is a bullish reversal pattern which appears typically at the end of a downtrend and signals the beginning of an upward move. But it is slighlty different. Here it consists of three candles a long bearish candle on day 1 which shows strong selling pressure, followed by small-bodied candle doji/spinning top which indicates indecision or pause on Day 2 and finally a long bullish candle that closes well in to the body of the first candle confirming a shift in momentum. This pattern often forms after a gap down opening and its strength increases as it accompanies by high volume suggesting that buyers are stepping in with more conviction.\u003c/p\u003e\u003cp\u003eMorning Star Trade Setup\u003c/p\u003e\u003cp\u003e\u003cstrong\u003e\u003cb\u003eEntry Strategy:\u003c/b\u003e\u003c/strong\u003e A trader may start a long position on Day 3, preferably at approximately 3:20 PM, once they verify that Days 1, 2, and 3 collectively create a valid Morning Star pattern.\u003c/p\u003e\u003cp\u003eTypically, it\u0026#8217;s unnecessary to wait for a confirmation on the fourth day, since the pattern indicates a strong likelihood of reversal.\u003c/p\u003e\u003cp\u003e\u003cstrong\u003e\u003cb\u003eChecklist for Validating Patterns:\u003c/b\u003e\u003c/strong\u003e\u003c/p\u003e\u003cp\u003eDay 1 should be a red (bearish) candle, indicating significant bearish momentum.\u003c/p\u003e\u003cp\u003eDay 2 is expected to start with a gap down and create either a Doji or a spinning top, signifying uncertainty in the market.\u003c/p\u003e\u003cp\u003eDay 3 is expected to begin with a gap up, and by 3:20 PM, the present market price should exceed the opening price of Day 1, validating bullish momentum.\u003c/p\u003e\u003cp\u003e\u003cstrong\u003e\u003cb\u003eStop-Loss Positioning:\u003c/b\u003e\u003c/strong\u003e Place the stop-loss at the lowest point of the candles within the pattern (Day 1, Day 2, and Day 3) to effectively control risk.\u003c/p\u003e\u003cp\u003e\u0026nbsp;\u003c/p\u003e\u003cfigure id=\u0022attachment_76282\u0022 aria-describedby=\u0022caption-attachment-76282\u0022 style=\u0022width: 2778px\u0022 class=\u0022wp-caption aligncenter\u0022\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022wp-image-76282 size-full\u0022 src=\u0022https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-7-Chapter-10.png\u0022 alt=\u0022Image 7-Chapter 10\u0022 width=\u00222788\u0022 height=\u00221168\u0022 srcset=\u0022https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-7-Chapter-10.png 2788w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-7-Chapter-10-300x126.png 300w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-7-Chapter-10-1024x429.png 1024w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-7-Chapter-10-768x322.png 768w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-7-Chapter-10-1536x643.png 1536w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-7-Chapter-10-2048x858.png 2048w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-7-Chapter-10-50x21.png 50w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-7-Chapter-10-100x42.png 100w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-7-Chapter-10-150x63.png 150w\u0022 sizes=\u0022(max-width: 2788px) 100vw, 2788px\u0022 /\u003e\u003cfigcaption id=\u0022caption-attachment-76282\u0022 class=\u0022wp-caption-text\u0022\u003eImage source : Trading view\u003c/figcaption\u003e\u003c/figure\u003e\u003cp\u003eHere in the above chart the pattern begins with the market in a firm downtrend where you can observe bears are dominating, and prices are consistently making new lows. On Day 1, this bearish momentum continues, forming a long red candle that signals aggressive selling. Then comes Day 2, which opens with a gap down, reinforcing the bearish grip. But surprisingly, the trading activity during the day creates indecision as the candle that forms is spinning top in our example. This pause in selling momentum introduces uncertainty, bears expected another strong down day, but the market hesitated.\u003c/p\u003e\u003cp\u003eThis hesitation sets the stage for a shift. On Day 3\u003cstrong\u003e\u003cb\u003e\u003c/b\u003e\u003c/strong\u003e, the market opens with a gap up, catching the bears off guard. A strong green candle forms, and by the end of the day, it closes well above the opening of P1’s red candle. This move signals that buyers have stepped in with conviction, reversing the earlier losses. If on Day 2 hadn’t been spinning top, the combination of P1 and P3 would resemble a bullish engulfing pattern.\u003c/p\u003e\u003cp\u003eThe third candle is the real turning point. The gap up itself shakes bearish confidence, and the sustained buying throughout the day confirms that sentiment has flipped. Traders now expect this bullish momentum to continue, making it a potential buying opportunity for the sessions ahead.\u003c/p\u003e\u003cp\u003eIn our above example see the chart below for Day 1\u003c/p\u003e\u003cfigure id=\u0022attachment_76284\u0022 aria-describedby=\u0022caption-attachment-76284\u0022 style=\u0022width: 2774px\u0022 class=\u0022wp-caption aligncenter\u0022\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022wp-image-76284 size-full\u0022 src=\u0022https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Chapter-10-Image-8.png\u0022 alt=\u0022Chapter 10 Image 8\u0022 width=\u00222784\u0022 height=\u00221184\u0022 srcset=\u0022https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Chapter-10-Image-8.png 2784w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Chapter-10-Image-8-300x128.png 300w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Chapter-10-Image-8-1024x435.png 1024w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Chapter-10-Image-8-768x327.png 768w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Chapter-10-Image-8-1536x653.png 1536w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Chapter-10-Image-8-2048x871.png 2048w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Chapter-10-Image-8-50x21.png 50w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Chapter-10-Image-8-100x43.png 100w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Chapter-10-Image-8-150x64.png 150w\u0022 sizes=\u0022(max-width: 2784px) 100vw, 2784px\u0022 /\u003e\u003cfigcaption id=\u0022caption-attachment-76284\u0022 class=\u0022wp-caption-text\u0022\u003eImage source : Trading view\u003c/figcaption\u003e\u003c/figure\u003e\u003cp\u003e\u0026nbsp;\u003c/p\u003e\u003cp\u003e\u003cstrong\u003e\u003cb\u003eThe OHLC Data for Day 1 is \u003c/b\u003e\u003c/strong\u003e\u003c/p\u003e\u003cp\u003e\u003cstrong\u003e\u003cb\u003eOpen \u003c/b\u003e\u003c/strong\u003e: 10738.65\u003c/p\u003e\u003cp\u003e\u003cstrong\u003e\u003cb\u003eHigh \u003c/b\u003e\u003c/strong\u003e: 10759.90\u003c/p\u003e\u003cp\u003e\u003cstrong\u003e\u003cb\u003eLow :\u003c/b\u003e\u003c/strong\u003e 10628.40\u003c/p\u003e\u003cp\u003e\u003cstrong\u003e\u003cb\u003eClose \u003c/b\u003e\u003c/strong\u003e: 10640.95\u003c/p\u003e\u003cp\u003e\u003cstrong\u003e\u003cb\u003eNow observe the Day 3 Chart below\u003c/b\u003e\u003c/strong\u003e\u003c/p\u003e\u003cfigure id=\u0022attachment_76286\u0022 aria-describedby=\u0022caption-attachment-76286\u0022 style=\u0022width: 2698px\u0022 class=\u0022wp-caption aligncenter\u0022\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022wp-image-76286 size-full\u0022 src=\u0022https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-11.png\u0022 alt=\u0022Image 11\u0022 width=\u00222708\u0022 height=\u0022968\u0022 srcset=\u0022https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-11.png 2708w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-11-300x107.png 300w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-11-1024x366.png 1024w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-11-768x275.png 768w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-11-1536x549.png 1536w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-11-2048x732.png 2048w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-11-50x18.png 50w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-11-100x36.png 100w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/Image-11-150x54.png 150w\u0022 sizes=\u0022(max-width: 2708px) 100vw, 2708px\u0022 /\u003e\u003cfigcaption id=\u0022caption-attachment-76286\u0022 class=\u0022wp-caption-text\u0022\u003eImage source : Trading view\u003c/figcaption\u003e\u003c/figure\u003e\u003cp\u003e\u0026nbsp;\u003c/p\u003e\u003cp\u003e\u003cstrong\u003e\u003cb\u003eThe OHLC DATA for Day 3 is\u003c/b\u003e\u003c/strong\u003e\u003c/p\u003e\u003cp\u003e\u003cstrong\u003e\u003cb\u003eOpen\u003c/b\u003e\u003c/strong\u003e : 10655.45\u003c/p\u003e\u003cp\u003e\u003cstrong\u003e\u003cb\u003eHigh\u003c/b\u003e\u003c/strong\u003e : 10752.70\u003c/p\u003e\u003cp\u003e\u003cstrong\u003e\u003cb\u003eLow :\u003c/b\u003e\u003c/strong\u003e 10646.40\u003c/p\u003e\u003cp\u003e\u003cstrong\u003e\u003cb\u003eClose\u003c/b\u003e\u003c/strong\u003e:10735.45\u003c/p\u003e\u003cp\u003eNow from both the charts you can see that because the market opened higher on the third day, buyers kept buying throughout the day and pushed the price up enough to recover all the losses from the first day. Because the close on the third day is equal to the opening on Day 1.\u003c/p\u003e\u003cp\u003eUnlike single or two-candle patterns, the morning star gives both risk taker and risk avers traders the confidence to enter a trade on the third day itself. There\u0026#8217;s usually no need to wait for a fourth-day confirmation, as the pattern itself signals a strong potential reversal.\u003c/p\u003e\u003cp\u003eHere’s how Arjun and Aakash will enter a long trade setup based on the morning star pattern:\u003c/p\u003e\u003col\u003e\u003cli\u003e\u003cb\u003e\u003c/b\u003e\u003cstrong\u003e\u003cb\u003eEntry Point:\u003c/b\u003e\u003c/strong\u003ePlan to enter the trade at the close of Day3, ideally around 3:20 PM, once you’re confident that Day1, Day2, and Day3 together form a valid morning star.\u003c/li\u003e\u003cli\u003e\u003cb\u003e\u003c/b\u003e\u003cstrong\u003e\u003cb\u003ePattern Validation Checklist:\u003c/b\u003e\u003c/strong\u003e\u003c/li\u003e\u003c/ol\u003e\u003cul\u003e\u003cli\u003eDay1 must be a red candle, showing strong bearish momentum.\u003c/li\u003e\u003cli\u003eDay2 should open with a gap down and form either a doji or a spinning top, indicating market indecision.\u003c/li\u003e\u003cli\u003eDay 3 should open with a gap up, and by 3:20 PM, the current market price should be above the opening price of Day1—this confirms bullish strength.\u003col start=\u00223\u0022\u003e\u003cli\u003e\u003cb\u003e\u003c/b\u003e\u003cstrong\u003e\u003cb\u003eStop Loss Placement:\u003c/b\u003e\u003c/strong\u003eUse the lowest low among the three candles (Day1, Day2, and Day3) as your stop loss level to manage risk effectively.\u003c/li\u003e\u003c/ol\u003e\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003e\u003cem\u003e\u003ci\u003eActivity Time\u003c/i\u003e\u003c/em\u003e\u003c/strong\u003e\u003c/p\u003e\u003cfigure id=\u0022attachment_76287\u0022 aria-describedby=\u0022caption-attachment-76287\u0022 style=\u0022width: 2398px\u0022 class=\u0022wp-caption aligncenter\u0022\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022wp-image-76287 size-full\u0022 src=\u0022https://www.5paisa.com/finschool/wp-content/uploads/2022/01/08708fbc-ef34-4f1a-9726-58120def82b6.png\u0022 alt=\u0022Image 9\u0022 width=\u00222408\u0022 height=\u00221024\u0022 srcset=\u0022https://www.5paisa.com/finschool/wp-content/uploads/2022/01/08708fbc-ef34-4f1a-9726-58120def82b6.png 2408w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/08708fbc-ef34-4f1a-9726-58120def82b6-300x128.png 300w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/08708fbc-ef34-4f1a-9726-58120def82b6-1024x435.png 1024w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/08708fbc-ef34-4f1a-9726-58120def82b6-768x327.png 768w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/08708fbc-ef34-4f1a-9726-58120def82b6-1536x653.png 1536w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/08708fbc-ef34-4f1a-9726-58120def82b6-2048x871.png 2048w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/08708fbc-ef34-4f1a-9726-58120def82b6-50x21.png 50w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/08708fbc-ef34-4f1a-9726-58120def82b6-100x43.png 100w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/08708fbc-ef34-4f1a-9726-58120def82b6-150x64.png 150w\u0022 sizes=\u0022(max-width: 2408px) 100vw, 2408px\u0022 /\u003e\u003cfigcaption id=\u0022caption-attachment-76287\u0022 class=\u0022wp-caption-text\u0022\u003eImage source : Trading view\u003c/figcaption\u003e\u003c/figure\u003e\u003cp\u003eA \u003cstrong\u003e\u003cb\u003eMorning Star\u003c/b\u003e\u003c/strong\u003e candlestick pattern appears on the chart in late November 2022. This bullish reversal pattern typically forms after a downtrend and consists of a long red candle, a small-bodied candle (indecision), and a long green candle.\u003c/p\u003e\u003cp\u003e\u003cstrong\u003e\u003cb\u003eQuestion:\u003c/b\u003e\u003c/strong\u003e If you’re a trader and you spot this Morning Star pattern after a decline, what would be a cautious next step?\u003c/p\u003e\u003cul\u003e\u003cli\u003eA) Enter a short position\u003c/li\u003e\u003cli\u003eB) Wait for confirmation of bullish momentum\u003c/li\u003e\u003cli\u003eC) Exit all positions immediately\u003c/li\u003e\u003cli\u003eD) Ignore the pattern—it’s unreliable\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003e\u003cb\u003eCorrect Answer:\u003c/b\u003e\u003c/strong\u003e\u003cstrong\u003e\u003cb\u003eB) Wait for confirmation of bullish momentum\u003c/b\u003e\u003c/strong\u003e\u003cstrong\u003e\u003cb\u003eWhy:\u003c/b\u003e\u003c/strong\u003e A Morning Star suggests a potential reversal, but confirmation from the next candle (e.g., another green candle or volume increase) helps validate the signal before acting.\u003c/p\u003e\u003c/div\u003e\u003cdiv id=\u0027text_slider_slide03\u0027 class=\u0027sa_hover_container\u0027 data-hash=\u0027Evening-Star-Candlestick-Pattern\u0027 style=\u0027padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:400px; \u0027\u003e\u003ch2 style=\u0022text-align: left\u0022\u003e\u003cstrong\u003e\u003cspan style=\u0022color: #f1566d\u0022\u003e\u003cspan style=\u0022color: #000000\u0022\u003e10.3 \u003c/span\u003e\u003c/span\u003e\u003c/strong\u003e\u003cstrong\u003e\u003cb\u003eEvening Star Candlestick Pattern\u003c/b\u003e\u003c/strong\u003e\u003c/h2\u003e\u003cp\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022aligncenter wp-image-76135 size-full\u0022 src=\u0022https://www.5paisa.com/marathi/finschool/wp-content/uploads/2022/01/Evening-Star-Candlestick-Pattern.png\u0022 alt=\u0022Evening Star Candlestick Pattern\u0022 width=\u0022450\u0022 height=\u0022392\u0022 srcset=\u0022https://www.5paisa.com/marathi/finschool/wp-content/uploads/2022/01/Evening-Star-Candlestick-Pattern.png 450w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/Evening-Star-Candlestick-Pattern-300x261.png 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/Evening-Star-Candlestick-Pattern-50x44.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/Evening-Star-Candlestick-Pattern-100x87.png 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/Evening-Star-Candlestick-Pattern-150x131.png 150w\u0022 sizes=\u0022(max-width: 450px) 100vw, 450px\u0022 /\u003e\u003c/p\u003e\u003cp\u003eEvening Star Candlestick Pattern is the last candlestick pattern in this chapter. The evening star is a bearish reversal candlestick pattern that typically appears at the end of an uptrend, signaling that the upward momentum may be coming to an end.\u003c/p\u003e\u003cfigure id=\u0022attachment_76289\u0022 aria-describedby=\u0022caption-attachment-76289\u0022 style=\u0022width: 2774px\u0022 class=\u0022wp-caption aligncenter\u0022\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022wp-image-76289 size-full\u0022 src=\u0022https://www.5paisa.com/finschool/wp-content/uploads/2022/01/71d7861b-6220-4c89-9790-5d42eb02917b.png\u0022 alt=\u0022Image 13\u0022 width=\u00222784\u0022 height=\u00221172\u0022 srcset=\u0022https://www.5paisa.com/finschool/wp-content/uploads/2022/01/71d7861b-6220-4c89-9790-5d42eb02917b.png 2784w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/71d7861b-6220-4c89-9790-5d42eb02917b-300x126.png 300w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/71d7861b-6220-4c89-9790-5d42eb02917b-1024x431.png 1024w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/71d7861b-6220-4c89-9790-5d42eb02917b-768x323.png 768w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/71d7861b-6220-4c89-9790-5d42eb02917b-1536x647.png 1536w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/71d7861b-6220-4c89-9790-5d42eb02917b-2048x862.png 2048w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/71d7861b-6220-4c89-9790-5d42eb02917b-50x21.png 50w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/71d7861b-6220-4c89-9790-5d42eb02917b-100x42.png 100w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/71d7861b-6220-4c89-9790-5d42eb02917b-150x63.png 150w\u0022 sizes=\u0022(max-width: 2784px) 100vw, 2784px\u0022 /\u003e\u003cfigcaption id=\u0022caption-attachment-76289\u0022 class=\u0022wp-caption-text\u0022\u003eImage source : Trading view\u003c/figcaption\u003e\u003c/figure\u003e\u003cp\u003eIt consists of three candles that unfold in sequence:\u003c/p\u003e\u003cul\u003e\u003cli\u003eThe first is a long green (bullish) candle showing strong buying activity which forms on Day1;\u003c/li\u003e\u003cli\u003eThe second opens with a gap up but forms a small-bodied candle, either a Doji or a spinning top, indicating indecision and a possible slowdown in bullish strength which forms on Day2;\u003c/li\u003e\u003cli\u003eThe third candle which forms on Day 3 opens with a gap down and forms a long red (bearish) candle that closes well below the midpoint of the first candle, confirming that sellers have taken control.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003eThis shift from strong buying to hesitation and then decisive selling reflects a change in market sentiment, making the evening star a reliable signal for traders to consider exiting long positions or initiating short trades.\u003c/p\u003e\u003cp\u003eLet us understand this with the help of example . Below chart shows Day 1 bullish candle OHLC Details\u003c/p\u003e\u003cp\u003e\u0026nbsp;\u003c/p\u003e\u003cp\u003e\u003cstrong\u003e\u003cb\u003eDay 1 I.e. on 18\u003c/b\u003e\u003c/strong\u003e\u003cstrong\u003e\u003csup\u003e\u003cb\u003eth\u003c/b\u003e\u003c/sup\u003e\u003c/strong\u003e\u003cstrong\u003e\u003cb\u003e November 2013 OHLC Data\u003c/b\u003e\u003c/strong\u003e\u003c/p\u003e\u003cfigure id=\u0022attachment_76291\u0022 aria-describedby=\u0022caption-attachment-76291\u0022 style=\u0022width: 2718px\u0022 class=\u0022wp-caption aligncenter\u0022\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022wp-image-76291 size-full\u0022 src=\u0022https://www.5paisa.com/finschool/wp-content/uploads/2022/01/947764ca-eab9-479d-b411-dfff73a15d4b.png\u0022 alt=\u0022947764ca-eab9-479d-b411-dfff73a15d4b\u0022 width=\u00222728\u0022 height=\u00221160\u0022 srcset=\u0022https://www.5paisa.com/finschool/wp-content/uploads/2022/01/947764ca-eab9-479d-b411-dfff73a15d4b.png 2728w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/947764ca-eab9-479d-b411-dfff73a15d4b-300x128.png 300w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/947764ca-eab9-479d-b411-dfff73a15d4b-1024x435.png 1024w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/947764ca-eab9-479d-b411-dfff73a15d4b-768x327.png 768w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/947764ca-eab9-479d-b411-dfff73a15d4b-1536x653.png 1536w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/947764ca-eab9-479d-b411-dfff73a15d4b-2048x871.png 2048w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/947764ca-eab9-479d-b411-dfff73a15d4b-50x21.png 50w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/947764ca-eab9-479d-b411-dfff73a15d4b-100x43.png 100w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/947764ca-eab9-479d-b411-dfff73a15d4b-150x64.png 150w\u0022 sizes=\u0022(max-width: 2728px) 100vw, 2728px\u0022 /\u003e\u003cfigcaption id=\u0022caption-attachment-76291\u0022 class=\u0022wp-caption-text\u0022\u003eImage source : Trading view\u003c/figcaption\u003e\u003c/figure\u003e\u003cp\u003e\u003cstrong\u003e\u003cb\u003eOpen:\u003c/b\u003e\u003c/strong\u003e 6111.05\u003c/p\u003e\u003cp\u003e\u003cstrong\u003e\u003cb\u003eHigh\u003c/b\u003e\u003c/strong\u003e:6196.80\u003c/p\u003e\u003cp\u003e\u003cstrong\u003e\u003cb\u003eLow\u003c/b\u003e\u003c/strong\u003e: 6110.40\u003c/p\u003e\u003cp\u003e\u003cstrong\u003e\u003cb\u003eClose\u003c/b\u003e\u003c/strong\u003e: 6189\u003c/p\u003e\u003cp\u003e\u003cstrong\u003e\u003cb\u003eDay 2 : I.e on 19\u003c/b\u003e\u003c/strong\u003e\u003cstrong\u003e\u003csup\u003e\u003cb\u003eth\u003c/b\u003e\u003c/sup\u003e\u003c/strong\u003e\u003cstrong\u003e\u003cb\u003e November 2013 OHLC Data\u003c/b\u003e\u003c/strong\u003e\u003c/p\u003e\u003cfigure id=\u0022attachment_76288\u0022 aria-describedby=\u0022caption-attachment-76288\u0022 style=\u0022width: 1386px\u0022 class=\u0022wp-caption aligncenter\u0022\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022wp-image-76288 size-full\u0022 src=\u0022https://www.5paisa.com/finschool/wp-content/uploads/2022/01/c86093ea-1fb7-47f4-8498-01af52b60b56-1.png\u0022 alt=\u0022Image 12\u0022 width=\u00221396\u0022 height=\u0022604\u0022 srcset=\u0022https://www.5paisa.com/finschool/wp-content/uploads/2022/01/c86093ea-1fb7-47f4-8498-01af52b60b56-1.png 1396w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/c86093ea-1fb7-47f4-8498-01af52b60b56-1-300x130.png 300w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/c86093ea-1fb7-47f4-8498-01af52b60b56-1-1024x443.png 1024w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/c86093ea-1fb7-47f4-8498-01af52b60b56-1-768x332.png 768w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/c86093ea-1fb7-47f4-8498-01af52b60b56-1-50x22.png 50w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/c86093ea-1fb7-47f4-8498-01af52b60b56-1-100x43.png 100w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/c86093ea-1fb7-47f4-8498-01af52b60b56-1-150x65.png 150w\u0022 sizes=\u0022(max-width: 1396px) 100vw, 1396px\u0022 /\u003e\u003cfigcaption id=\u0022caption-attachment-76288\u0022 class=\u0022wp-caption-text\u0022\u003eImage source : Trading view\u003c/figcaption\u003e\u003c/figure\u003e\u003cp\u003e\u003cstrong\u003e\u003cb\u003eOpen :\u003c/b\u003e\u003c/strong\u003e 6197.25\u003c/p\u003e\u003cp\u003e\u003cstrong\u003e\u003cb\u003eHigh\u003c/b\u003e\u003c/strong\u003e:6212.40\u003c/p\u003e\u003cp\u003e\u003cstrong\u003e\u003cb\u003eLow\u003c/b\u003e\u003c/strong\u003e:6180.20\u003c/p\u003e\u003cp\u003e\u003cstrong\u003e\u003cb\u003eClose:\u003c/b\u003e\u003c/strong\u003e6203.35\u003c/p\u003e\u003cp\u003e\u003cstrong\u003e\u003cb\u003eDay 3 : I.e on 20\u003c/b\u003e\u003c/strong\u003e\u003cstrong\u003e\u003csup\u003e\u003cb\u003eth\u003c/b\u003e\u003c/sup\u003e\u003c/strong\u003e\u003cstrong\u003e\u003cb\u003e November 2013 OHLC Data\u003c/b\u003e\u003c/strong\u003e\u003c/p\u003e\u003cfigure id=\u0022attachment_76292\u0022 aria-describedby=\u0022caption-attachment-76292\u0022 style=\u0022width: 2778px\u0022 class=\u0022wp-caption aligncenter\u0022\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022wp-image-76292 size-full\u0022 src=\u0022https://www.5paisa.com/finschool/wp-content/uploads/2022/01/446cc528-1eaf-4bf9-a537-cb5b472e8e8f.png\u0022 alt=\u0022446cc528-1eaf-4bf9-a537-cb5b472e8e8f\u0022 width=\u00222788\u0022 height=\u00221192\u0022 srcset=\u0022https://www.5paisa.com/finschool/wp-content/uploads/2022/01/446cc528-1eaf-4bf9-a537-cb5b472e8e8f.png 2788w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/446cc528-1eaf-4bf9-a537-cb5b472e8e8f-300x128.png 300w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/446cc528-1eaf-4bf9-a537-cb5b472e8e8f-1024x438.png 1024w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/446cc528-1eaf-4bf9-a537-cb5b472e8e8f-768x328.png 768w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/446cc528-1eaf-4bf9-a537-cb5b472e8e8f-1536x657.png 1536w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/446cc528-1eaf-4bf9-a537-cb5b472e8e8f-2048x876.png 2048w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/446cc528-1eaf-4bf9-a537-cb5b472e8e8f-50x21.png 50w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/446cc528-1eaf-4bf9-a537-cb5b472e8e8f-100x43.png 100w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/446cc528-1eaf-4bf9-a537-cb5b472e8e8f-150x64.png 150w\u0022 sizes=\u0022(max-width: 2788px) 100vw, 2788px\u0022 /\u003e\u003cfigcaption id=\u0022caption-attachment-76292\u0022 class=\u0022wp-caption-text\u0022\u003eImage source : Trading view\u003c/figcaption\u003e\u003c/figure\u003e\u003cp\u003e\u003cstrong\u003e\u003cb\u003eOpen \u003c/b\u003e\u003c/strong\u003e: 6186.85\u003c/p\u003e\u003cp\u003e\u003cstrong\u003e\u003cb\u003eHigh: \u003c/b\u003e\u003c/strong\u003e6204.35\u003c/p\u003e\u003cp\u003e\u003cstrong\u003e\u003cb\u003eLow\u003c/b\u003e\u003c/strong\u003e: 6106.95\u003c/p\u003e\u003cp\u003e\u003cstrong\u003e\u003cb\u003eClose\u003c/b\u003e\u003c/strong\u003e:6122.90\u003c/p\u003e\u003cp\u003eNow if you observe all the three charts on Day 1 a strong bullish candle is formed where buyers were in control. The market opened low and closed at high indicating bullish momentum. But on Day 2 the market opens with gap up from previous close (Day 2 Open : 6197.25 Day 1 Close : 6189) which initially suggests continued bullishness. However, the candle closes near its low, forming a small-bodied candle likely a spinning top and this indicates indecision. This is a key signal buyers are losing strength. On Day 3, the market opens with a gap down from Day 2’s close (Day 3 opening : 6186.85 Day 2 close : 6203.35) and forms a long red candle which shows sellers have taken control.\u003c/p\u003e\u003cp\u003e\u003cstrong\u003e\u003cb\u003eEvening Star Trade Setup\u003c/b\u003e\u003c/strong\u003e\u003c/p\u003e\u003cp\u003eEntry Strategy :Initiate a short trade on Day 3, ideally around 3:20 PM, after confirming that Day 1 to Day 3 form a valid Evening Star pattern.\u003c/p\u003e\u003cp\u003e\u003cstrong\u003e\u003cb\u003ePattern Validation Checklist\u003c/b\u003e\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003eDay1 should be a green (bullish) candle, indicating strong buying momentum.\u003c/li\u003e\u003cli\u003eDay 2 must open with a gap up and form either a Doji or a spinning top, showing market indecision.\u003c/li\u003e\u003cli\u003eDay 3 should open with a gap down and form a red (bearish) candle. By 3:20 PM, the current market price should be lower than the opening price of Day 1, confirming bearish control.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003e\u003cb\u003eTrade Timing\u003c/b\u003e\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003eBoth risk-takers and risk-averse traders can enter the trade on Day 3 itself, without waiting for a fourth-day confirmation.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003e\u003cb\u003eStop Loss Placement\u003c/b\u003e\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003eSet the stop loss at the highest high among Day 1, Day 2, and Day 3 to manage risk effectively.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eActivity For You\u003c/strong\u003e\u003c/p\u003e\u003cfigure id=\u0022attachment_76293\u0022 aria-describedby=\u0022caption-attachment-76293\u0022 style=\u0022width: 2398px\u0022 class=\u0022wp-caption aligncenter\u0022\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022wp-image-76293 size-full\u0022 src=\u0022https://www.5paisa.com/finschool/wp-content/uploads/2022/01/29d236ac-eb54-424b-b119-544a1e76c8de.png\u0022 alt=\u002229d236ac-eb54-424b-b119-544a1e76c8de\u0022 width=\u00222408\u0022 height=\u00221040\u0022 srcset=\u0022https://www.5paisa.com/finschool/wp-content/uploads/2022/01/29d236ac-eb54-424b-b119-544a1e76c8de.png 2408w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/29d236ac-eb54-424b-b119-544a1e76c8de-300x130.png 300w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/29d236ac-eb54-424b-b119-544a1e76c8de-1024x442.png 1024w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/29d236ac-eb54-424b-b119-544a1e76c8de-768x332.png 768w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/29d236ac-eb54-424b-b119-544a1e76c8de-1536x663.png 1536w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/29d236ac-eb54-424b-b119-544a1e76c8de-2048x885.png 2048w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/29d236ac-eb54-424b-b119-544a1e76c8de-50x22.png 50w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/29d236ac-eb54-424b-b119-544a1e76c8de-100x43.png 100w, https://www.5paisa.com/finschool/wp-content/uploads/2022/01/29d236ac-eb54-424b-b119-544a1e76c8de-150x65.png 150w\u0022 sizes=\u0022(max-width: 2408px) 100vw, 2408px\u0022 /\u003e\u003cfigcaption id=\u0022caption-attachment-76293\u0022 class=\u0022wp-caption-text\u0022\u003eImage source : Trading view\u003c/figcaption\u003e\u003c/figure\u003e\u003cp\u003eAn Evening Star pattern appears on the chart twice—once in October 2020 and again in March 2022. This bearish reversal pattern typically forms after an uptrend and consists of a large green candle, a small-bodied candle (indecision), and a large red candle.\u003c/p\u003e\u003cp\u003e\u003cstrong\u003e\u003cb\u003eQuestion:\u003c/b\u003e\u003c/strong\u003e If you’re a trader and you spot this pattern near a recent high, what would be a cautious next step?\u003c/p\u003e\u003cul\u003e\u003cli\u003eA) Enter a long position\u003c/li\u003e\u003cli\u003eB) Wait for bullish confirmation\u003c/li\u003e\u003cli\u003eC) Consider reducing long exposure or preparing for a reversal\u003c/li\u003e\u003cli\u003eD) Ignore the signal—it’s unreliable\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003e\u003cb\u003eCorrect Answer:\u003c/b\u003e\u003c/strong\u003e\u003cstrong\u003e\u003cb\u003eC) Consider reducing long exposure or preparing for a reversal\u003c/b\u003e\u003c/strong\u003e\u003cstrong\u003e\u003cb\u003eWhy:\u003c/b\u003e\u003c/strong\u003e The Evening Star is a strong bearish signal indicating potential trend reversal. It’s wise to manage risk and wait for further confirmation before making bullish trades.\u003c/p\u003e\u003c/div\u003e\u003cdiv id=\u0027text_slider_slide04\u0027 class=\u0027sa_hover_container\u0027 data-hash=\u0027Entry-Exit-and-Stop-Loss-Summary-for-Candlestick-Trades\u0027 style=\u0027padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:400px; \u0027\u003e\u003ch2 style=\u0022text-align: left\u0022\u003e\u003cstrong\u003e\u003cspan style=\u0022color: #f1566d\u0022\u003e\u003cspan style=\u0022color: #000000\u0022\u003e10.4 \u003c/span\u003e\u003c/span\u003e\u003c/strong\u003e\u003cstrong\u003e\u003cb\u003eEntry\u003c/b\u003e\u003c/strong\u003e\u003cstrong\u003e\u003cb\u003e, Exit\u003c/b\u003e\u003c/strong\u003e\u003cstrong\u003e\u003cb\u003e and Stop Loss Summary for Candlestick Trades\u003c/b\u003e\u003c/strong\u003e\u003c/h2\u003e\u003cp\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022aligncenter wp-image-76136 size-full\u0022 src=\u0022https://www.5paisa.com/marathi/finschool/wp-content/uploads/2022/01/Entry-Exit-and-Stop-Loss-Summary.png\u0022 alt=\u0022Entry, Exit and Stop Loss Summary\u0022 width=\u0022431\u0022 height=\u0022418\u0022 srcset=\u0022https://www.5paisa.com/marathi/finschool/wp-content/uploads/2022/01/Entry-Exit-and-Stop-Loss-Summary.png 431w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/Entry-Exit-and-Stop-Loss-Summary-300x291.png 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/Entry-Exit-and-Stop-Loss-Summary-50x48.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/Entry-Exit-and-Stop-Loss-Summary-100x97.png 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/Entry-Exit-and-Stop-Loss-Summary-150x145.png 150w\u0022 sizes=\u0022(max-width: 431px) 100vw, 431px\u0022 /\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003eThe two types of traders who use candlestick patterns for trading are risk-averse and risk-takers, and they have different methods for determining when to enter a trade.\u003c/li\u003e\u003cli\u003eThose who take risks like to move fast. Once they have verified that the pattern satisfies all necessary requirements, they enter the trade on the last day of the pattern, usually at approximately 3:20 PM. They don\u0026#8217;t wait for additional confirmation if the setup is legitimate.\u003c/li\u003e\u003cli\u003eConversely, traders who are risk averse wait an additional day to validate the signal. They watch for a blue candle the next day for a bullish setup. They anticipate a red candle for a bearish setup. Although it may cause slightly delayed entries, this extra step helps reduce false signals.\u003c/li\u003e\u003cli\u003eGenerally speaking, the stronger the signal, the more candles are used to form the pattern (such as in three-day setups); therefore, it is usually acceptable to enter on the final day.\u003c/li\u003e\u003cli\u003eThe rule for placing a stop loss is straightforward:\u003c/li\u003e\u003cli\u003eSet the stop loss for a long (buy) trade at the pattern\u0026#8217;s lowest low for each candle.\u003c/li\u003e\u003cli\u003eSet the stop loss for a short (sell) trade at the pattern\u0026#8217;s highest high.\u003c/li\u003e\u003c/ul\u003e\u003c/div\u003e\u003cdiv id=\u0027text_slider_slide05\u0027 class=\u0027sa_hover_container\u0027 data-hash=\u0027What\u0027s-Next\u0027 style=\u0027padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:400px; \u0027\u003e\u003ch2 style=\u0022text-align: left\u0022\u003e\u003cspan style=\u0022color: #000000\u0022\u003e\u003cstrong\u003e10.5 \u003c/strong\u003e\u003c/span\u003e\u003cstrong\u003e\u003cb\u003eWhat’s Next?\u003c/b\u003e\u003c/strong\u003e\u003c/h2\u003e\u003cp\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022aligncenter wp-image-76137 size-full\u0022 src=\u0022https://www.5paisa.com/marathi/finschool/wp-content/uploads/2022/01/Whats-Next.png\u0022 alt=\u0022What\u0027s Next\u0022 width=\u0022430\u0022 height=\u0022252\u0022 srcset=\u0022https://www.5paisa.com/marathi/finschool/wp-content/uploads/2022/01/Whats-Next.png 430w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/Whats-Next-300x176.png 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/Whats-Next-50x29.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/Whats-Next-100x59.png 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/Whats-Next-150x88.png 150w\u0022 sizes=\u0022(max-width: 430px) 100vw, 430px\u0022 /\u003e\u003c/p\u003e\u003cp\u003eAs we conclude our journey through the foundational concepts of technical analysis, it’s clear that price action, candlestick patterns, and chart structures offer powerful insights into market psychology.We have explored how candlestick formations like the Morning Star and Evening Star reflect shifts in sentiment.By using patterns that recur over time and across asset classes, these tools enable traders to visually interpret market behavior and make well-informed decisions.\u003c/p\u003e\u003cp\u003eCandlestick patterns are useful for understanding market behavior, but they don\u0026#8217;t always explain why momentum is increasing or decreasing. Technical indicators are useful in this situation. A trend\u0026#8217;s strength, direction, and possible turning points can be determined by traders using indicators, which are mathematical computations based on price, volume, or volatility. They serve as auxiliary tools, deepening our analysis and assisting in the validation or sifting of the signals we see on the chart.\u003c/p\u003e\u003cp\u003eWe\u0026#8217;ll understand technical indicators in the upcoming chapters, starting with some of the most popular ones like moving averages, RSI, and MACD. We will be able to measure market conditions, pinpoint overbought or oversold areas, and improve our entry and exit tactics with the aid of these indicators. We will be more capable of confidently and clearly navigating the market\u0026#8217;s complexities if we use indicators as our analytical compass and candlestick patterns as our visual guide.\u003c/p\u003e\u003c/div\u003e\u003cdiv id=\u0027text_slider_slide06\u0027 class=\u0027sa_hover_container\u0027 data-hash=\u0027Key-Takeaways\u0027 style=\u0027padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:400px; \u0027\u003e\u003ch2 style=\u0022text-align: left\u0022\u003e\u003cspan style=\u0022color: #000000\u0022\u003e\u003cstrong\u003e10.6 \u003c/strong\u003e\u003c/span\u003e\u003cstrong\u003e\u003cb\u003eKey TaKeaways\u003c/b\u003e\u003c/strong\u003e\u003c/h2\u003e\u003cp\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022aligncenter wp-image-76118 size-full\u0022 src=\u0022https://www.5paisa.com/marathi/finschool/wp-content/uploads/2022/01/Key-Takeaways-4.png\u0022 alt=\u0022Key Takeaways\u0022 width=\u0022444\u0022 height=\u0022418\u0022 srcset=\u0022https://www.5paisa.com/marathi/finschool/wp-content/uploads/2022/01/Key-Takeaways-4.png 444w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/Key-Takeaways-4-300x282.png 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/Key-Takeaways-4-50x47.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/Key-Takeaways-4-100x94.png 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2022/01/Key-Takeaways-4-150x141.png 150w\u0022 sizes=\u0022(max-width: 444px) 100vw, 444px\u0022 /\u003e\u003c/p\u003e\u003col\u003e\u003cli\u003e\u003cb\u003e\u003c/b\u003e\u003cstrong\u003e\u003cb\u003eUnderstanding Gaps\u003c/b\u003e\u003c/strong\u003e: Gaps occur when a stock’s opening price is different from its previous day’s closing price, creating a visible space between the two candlesticks on a daily chart.\u003c/li\u003e\u003cli\u003e\u003cb\u003e\u003c/b\u003e\u003cstrong\u003e\u003cb\u003eGap Up opening\u003c/b\u003e\u003c/strong\u003e: This happens when a stock opens higher than its previous close, often reflecting bullish sentiment due to positive news, strong global cues, or institutional buying.\u003c/li\u003e\u003cli\u003e\u003cb\u003e\u003c/b\u003e\u003cstrong\u003e\u003cb\u003eGap down opening\u003c/b\u003e\u003c/strong\u003e: This is the opposite of a gap up, where the stock opens lower than its previous close, often driven by negative news or a desire by traders to get rid of the stock.\u003c/li\u003e\u003cli\u003e\u003cb\u003e\u003c/b\u003e\u003cstrong\u003e\u003cb\u003eMorning Star Pattern\u003c/b\u003e\u003c/strong\u003e: The Morning Star is a three-candle bullish reversal pattern that typically appears at the end of a downtrend and signals the beginning of an upward move.\u003c/li\u003e\u003cli\u003e\u003cb\u003e\u003c/b\u003e\u003cstrong\u003e\u003cb\u003eMorning Star Candle Sequence\u003c/b\u003e\u003c/strong\u003e: The pattern consists of a long bearish candle on Day 1, a small-bodied candle (Doji or spinning top) on Day 2, and a long bullish candle on Day 3 that closes well within the body of the first candle.\u003c/li\u003e\u003cli\u003e\u003cb\u003e\u003c/b\u003e\u003cstrong\u003e\u003cb\u003eMorning Star Confirmation\u003c/b\u003e\u003c/strong\u003e: The pattern often begins with a gap down on Day 2 and is confirmed by a gap up on Day 3, which catches bears off guard and signals that buyers have stepped in with conviction.\u003c/li\u003e\u003cli\u003e\u003cb\u003e\u003c/b\u003e\u003cstrong\u003e\u003cb\u003eEvening Star Pattern\u003c/b\u003e\u003c/strong\u003e: This is a bearish reversal pattern that typically appears at the end of an uptrend, signaling that upward momentum may be ending.\u003c/li\u003e\u003cli\u003e\u003cb\u003e\u003c/b\u003e\u003cstrong\u003e\u003cb\u003eEvening Star Candle Sequence\u003c/b\u003e\u003c/strong\u003e: It consists of a long bullish candle on Day 1, a small-bodied candle (Doji or spinning top) on Day 2 that opens with a gap up, and a long bearish candle on Day 3 that opens with a gap down and closes well below the midpoint of the first candle.\u003c/li\u003e\u003cli\u003e\u003cb\u003e\u003c/b\u003e\u003cstrong\u003e\u003cb\u003eTrader Entry Strategies\u003c/b\u003e\u003c/strong\u003e: For three-candle patterns like the Morning Star and Evening Star, both risk-takers and risk-averse traders can enter a trade on the third day itself, as the pattern itself signals a strong potential reversal and there is usually no need to wait for a fourth-day confirmation.\u003c/li\u003e\u003cli\u003e\u003cb\u003e\u003c/b\u003e\u003cstrong\u003e\u003cb\u003eStop-Loss Placement\u003c/b\u003e\u003c/strong\u003e: For a long (buy) trade, the stop-loss is placed at the lowest low among the candles in the pattern. 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Triangles are among the most reliable of the continuation patterns. There are three types of triangles that have forecasting value – symmetrical, ascending and descending triangles. 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