Which candlestick pattern consists of three candles and indicates a bullish reversal?

The Morning Star pattern is a significant candlestick formation that consists of three distinct candles and is widely recognized as a bullish reversal signal. This pattern typically appears at the bottom of a downtrend and indicates that selling pressure may be weakening and a potential reversal could occur.

The first candle in the Morning Star is a long bearish candle, which establishes the prevailing downtrend. The second candle is often a small-bodied candlestick that can be either bullish or bearish; it indicates indecision in the market as the momentum shifts. The third candle is a long bullish candle that closes at or above the midpoint of the first candle, confirming that buyers are starting to take control.

This three-candle pattern effectively communicates a change in market sentiment, making it a powerful tool for traders looking to identify potential buying opportunities following a downtrend. Recognizing and understanding the dynamics behind the Morning Star pattern is crucial for traders aiming to capitalize on bullish reversals.