Morning Star

Ah, the morning star. Like its namesake planet Venus, which glows oh so bright in the early-morning eastern sky, the term means that dawn is about to break, the tide is about to turn in our favor, and everything that was dumb is about to be...awesome.

In the financial world, the term “morning star” means something similar. It refers to a security’s downward trend that appears to be ending.

It’s actually a candlestick formation made up of three candles: the first one is tall, the middle one is short with long tails, and the third one is tall and white (or green, depending on whether we’re looking at a black-and-white or color chart). The formation says to us that the market is feeling bullish about this certain security, at least in terms of the last three trading sessions.

Do morning stars mean that the security is most definitely something we should buy right away? Maybe, maybe not. All they really tell us is that there looks to be an upward trend reversal in the security’s price. Morning stars always follow a downward trend, but that doesn’t mean they can’t precede another one.