EXPLAINER-Candlestick chart star reversal patterns

An explanation of the candlestick star reversal signals, their construction and what they can tell us about price action within a currency chart:

Reversal signals are unlikely to precede an immediate change in the trend direction but rather can warn that the underlying trend could be about to stop, consolidate or begin to weaken into a direction change.

Star patterns are formed when a candle has a small real body (the shaded area between the open and close) that gaps away from the previous session's large real body. The smaller real body can be within the prior candle's shadow (the area between the high or low and the open or close) but the real bodies mustn't overlap.

Candlestick stars and especially a doji star (close at, or very near the open) can warn that a trend might be ending.

Morning and evening stars: These star patters are made up of three candles. The morning star reversal has a large bearish candle followed by the star candle and then a bullish candle that intrudes deeply into the first candle. The evening star reversal warning follows the same pattern but can be seen after an up-trend.

The formation of stars in an accelerating bull or bear trend can signal a shift in the market where buyers and sellers become deadlocked and can warn of a direction change.