It is an interesting phenomenon, sometimes, the person you think will be the least assistance to you, ends up doing the most. Often that person is you. Decide you can successfully trade options, then start and move in that direction, and it will happen. Yay!
Here’s What Is Covered Below:
- How To Spot Bullish Evening Star and Morning Star Patterns
- How To Read the Patterns and What They Reveal
- Learn to Use them to Spot a Trade Candidate and Its Trade Direction
- Positive Tip to Boost Your Trading Confidence
Friday is education day. My goal is to teach everyday people (like me) to successfully trade options. I do my best to write in an understandable way as if we are talking while sitting on my deck in a relaxed atmosphere.
The trading tools you select and use are important, and can make your trading easier and more effective. Today, I chose Evening and Morning Star candle patterns to discuss.
Last week, we discussed candlesticks in a general sense and the information they provide on a stock’s chart. Morning and Evening Star candles provide specific information that helps to suggest a stock’s upcoming price movement.
I am going to post an image of a chart and then, we will discuss these specific Candlesticks and pattern.
Notice that all of the candlesticks as we discussed last week show where the candle opened, closed as well as its high and low. Morning and Evening Star candle patterns provide that same information, but you can see the candlestick portion of the middle candle is very small and the high and low wicks are almost the same size, like a cross.
Often the Morning and Evening Star Candlestick patterns are turning points. Let’s discuss the Morning Star candle pattern first. Its pattern is formed by the combination of three candlesticks. The candle to the left of the three is a strong bearish candle showing a sizable drop. The next candle is significant. Its candle shape is a small one with wicks approximately the same size (upper and lower). It can be either color. The third candle is a bullish candle, meaning price is moving up and it completes the Morning Star pattern.
The combination of these three candlesticks suggests a shift in direction. It is a reversal from being bearish and heading down to a switch where it will now head up for a period of time.
The bearish Evening Star pattern is also formed by three candlesticks. The first candle is a green bullish candle that is heading up and next you have the Evening Star. Again, this is a candle with a small body and upper and lower wicks that are about the same size, it can be either color. The third candlestick is a bearish candle, showing that price is now heading down. Again, this is usually a shift in trend direction and not just a day that is different than the previous day.
The chart below shows 3 patterns: 2 Morning Stars and one Evening on Google’s chart from August 16th to September 28th.
On this chart, had you spotted the candle pattern on the left-top, you could have entered a put trade, riding price down. The middle pattern would have put the brakes on the first trade and perhaps, an entry into a call trade that just lasted a few days. The last pattern would have been an exit to the call trade and another put option trade signal.
Notice all the wicks on the other candles on the chart are usually long on one side or the other and have larger bodies.
So why is this helpful. If you are looking at charts as you look for an equity to consider trading, when you spot an Evening or Morning Star pattern beginning to form, perhaps spotting the middle small-bodied candle with nearly even wicks, you might decide to note down the symbol with the idea that if it moves in the expected direction tomorrow, you might consider it as a trade candidate.
Learning to read candles is an important part of learning to successful trade options.
Often when you are trying to learn something new, you need to change your thinking. Impatience can be a sign of being rushed, rushing is a sign of being upset or worrying, being upset or worried is a sign of fear and fear is a sign that you need to change your thoughts to “can-do”. It is never too late to change your thoughts to know you’ll be successful at whatever you are trying to accomplish. Take it one step at a time. WTG!
I wish you the very best,