The first candle in the Bullish Morning Star pattern is a long bearish candle that indicates a strong decline in the asset price. The second candle is a short candle with a small body and a lower shadow, which indicates a decrease in volatility and a narrowing of the trading range. The third candle is a long bullish candle that indicates a strong price increase and signals a possible trend reversal.
It is important to note that a Bullish Morning Star is considered a more reliable signal if it forms at a support level or an important technical level. This confirms the significance of the pattern and increases the probability of a trend reversal.
When traders discover the Bullish Morning Star pattern on the chart, they can use it as a signal to enter a buy position. Such a signal indicates that the downward trend may be over and the market may start moving up. Traders can set stop losses below the lower shadow of the third candle to protect their positions from potential losses.
