Hi, I have just started learning candlesticks. I have a query on Gap up / Gap down.
While reading the chart I found a downtrend and DOJI between Bearish and Bullish candle. My query is which one should we consider as Gap up or gap down? Previous candle Open or close price?
Can we consider this as morning star?
There are mainly four types of gaps…
But the main two broad category is the :- partial gap up/ gap down… And full gap up/ gap down ( commonly called gap up/ gap down)
Partial gap up is when the opening
price of the today’s candle opens above the closing price of the previous candle but not above the high of the previous day …and partial gap down is when the today’s opening price is lower than the previous days closing price but not lower than tha day’s low…
And when the price opens higher than the previous day’s high it is called gap up… And if it opens lower than the previous day’s low it is call gap down…
Morning star pattern is formed at the bottom of a downtrend and it gives us a warning sign that the ongoing downtrend is going to reverse. It is a triple candlestick pattern that indicated bullish reversal.
To trade morning star pattern with technical indicators -
Bollinger Bands - Morning star is formed after a bearish trend and signals bullish reversal. When using the one should enter the trade when the morning is formed below the lower Bollinger band.
Relative Strength Index - For this strategy, we will be using 5 periods RSI. We will enter into the buy position when the RSI moves above 30, from below with the formation of the morning star on the chart.