Chartered Market Technician (CMT) Practice Exam 2025 - Free CMT Practice Questions and Study Guide.

The Morning Star candlestick pattern is a strong indicator of bullish sentiment, particularly when it appears after a downtrend. This pattern consists of three candles: the first is a long bearish candle, indicating that the selling pressure is strong; the second is a small-bodied candle (which can be bullish or bearish) that gaps down from the first candle, demonstrating indecision in the market; and the third is a long bullish candle, which confirms the shift in sentiment and suggests a reversal to the upside.

When traders see this pattern, especially if it forms at a key support level or after a significant downtrend, it signals that buyers are starting to take control, reinforcing the bullish outlook. The confirmation of the pattern occurs when the closing price of the third candle is above the midpoint of the first candle, indicating stronger buying pressure.

Other patterns listed, like the Inverted Hammer, Gap patterns, and Hanging Man, do not convey the same level of bullish confirmation. The Inverted Hammer, while it can suggest potential bullish reversal when found in a downtrend, lacks the specific confirmation stage that is seen in the Morning Star. The Hanging Man typically appears at the top of an uptrend, signifying potential weakness, while a Runaway Gap represents a strong trend