Chartered Market Technician (CMT) Practice Exam 2025 – Your All-in-One Guide to Exam Success!

The morning star pattern is a well-known candlestick formation that suggests a potential bullish reversal in the market. This pattern typically occurs at the end of a downtrend and is identified by three distinct candlesticks.

The first candlestick is a long bearish (down) candle, indicating strong selling pressure. The second candlestick can be a small body, which may be bullish or bearish, and it often gaps down from the first, signifying indecision in the market. The third candlestick is a long bullish (up) candle that closes well into the body of the first candle, indicating that buyers have taken control and may continue to push prices higher.

This sequence reflects a shift from bearish sentiment to a more bullish outlook, making it a powerful signal for traders looking for potential buying opportunities following a period of declining prices. The presence of the long bullish candle alongside the previous downtrend makes the morning star a strong hint of an upward reversal, giving traders a cue to consider entering long positions.