Bullish Morningstar Patterns on Some Problematic Charts
We’re all familiar with the morningstar candle pattern. It is a three day bullish reversal pattern formed by a large dark down candle, followed by a narrow opening and closing range “doji” candle, and completed by a large white up candle. It reflects a transition from bearishness to bullishness. This pattern has formed on the daily charts of several stocks that have been particularly problematic recently: the iShares Nasdaq Biotechnology (IBB) ETF, the Market Vectors Semiconductor ETF (SMH), Exxon Mobil (XOM), Caterpillar (CAT), Dow Chemical (DOW), and Wal-Mart Stores (WMT). The morningstar is one of the more reliable technical patterns and is often seen at important bottoms, but like any candle formation or technical pattern it requires confirmation.