Morning Star Variations
In reality there are various versions of the Morning Star signal you will come across as a candlestick trader. We will elaborate on some common variations shown in the following figure.
Gravestone Doji Morning Star signal
The second day of the signal is a Gravestone Doji.
Hammer Morning Star signal
The second day of the signal is a Hammer signal.
Inverted Hammer Morning Star signal
The second day of the signal is an Inverted Hammer signal.
Abandoned baby Morning Star signal
This is the most powerful evening star signal. This type of signal has a gap between the first day's low and second day's high AND a gap between the second day's high and third day's low. The gaps represent extremeness. The first gap represents panic selling. When do most investors sell? At the bottom! This selling is absorbed by smart money. This price action leads to an indecisive day. The second gap represents tremendous strength from the bulls showing that the decision is now made favorable to the bulls.