Candlesticks Evening Star

When we talk about reversal patterns in candlestick charting we are looking for patterns that indicate that a clearly defined trend (in this case an uptrend) is about to reverse direction and become a downtrend.

The Evening Star formation, which is the opposite of the Morning Star formation, is a three candle formation that signals an reversal, usually occuring at the top of a clearly identifiable uptrend.

As shown in the diagram (left).

• The first candle must be a strong up candle with a tall body, it shows that the bulls are in control, with their buying pushing the price upwards.

• The second candle should have a higher opening (gap)and a small red or green body, this signals a top in the market and the end of the up trend where the buyers and sellers are evenly balanced, the 'Star' refers to the gap from the open to the previous days close.

• The third candle is the confirmation of a trend reversal and its red body should extend at least half way into the green body of the first candle, this shows the bears have taken control and the selling should cause any bulls to sell to cover their positions

 

An Evening Doji Star (shown below) refers to the Doji formation in which the second candle has no 'body' as the open is the same price as the close, it is suggested that the presence of the Doji increases the potential, and possibly the severity of the reversal signal.