The Evening Star candlestick pattern is a highly reliable trend change formation that occurs in bull markets and indicates that there is a high probability that the price will change from bullish to bearish trend. This pattern can be identified in the following way:

  • The previous trend must necessarily be bearish.
  • A large white candlestick is followed by a candlestick (white or black) with a small body which opens and closes above the body of the large white candle. 
  • In the following period a black candlestick is formed and its opening price is formed below the minimum price of the body of the previous candlestick while the closing price occurs inside the body of the great white candle that started the formation.

Evening Star pattern

Interpretation of the Evening Star pattern

According to the Japanese traders, during an uptrend in the market the Yang occurs (it is signaled by a large white candle), after which comes the calm period represented by a bullish or bearish candle with a small candle. This period of calm indicates that another period of turmoil in the market is likely to come in the form of Yin, which in turn is represented by a black candle with an extended body which penetrates and closes well inside the great white candle.

As with most combined bearish candlestick patterns, this formation is more reliable when is formed near resistance zones. Once the Evening Star is produced, it becomes a resistance zone, with the maximum or highest point (top tail) of the candle in the middle (the candle with a small body) being the price level at which we can expect the greatest resistance for the upward movement in the market.

Sometimes there may be problems in interpreting this pattern. If the candlestick formation occurs exactly according to its definition, there should be no greater problem, however, on many occasions this pattern appears in the most varied forms. In this case, it should be noted that the Evening Star is more reliable as it comes closer to its theoretical definition. The experts in chart pattern analysis recommend having a high flexibility when interpreting this pattern. For this we can apply the following tips:

  • It must be taken into account if the evening star is close to a resistance level and/or the market is in an overbought condition.
  • If the formation is not very clear and we have doubts about its reliability, it is recommended to wait for a confirmation during the following period.
  • Another recommendation that the trader can apply is the construction of a “combined candlestick” from the three candles that make up the pattern. This combined candle gives an idea of the direction that the market can follow during the following periods and is constructed as follows: Opening + Maximum + Minimum + Closing of the three candlesticks of the formation.

Evening Star Pattern Example

Real example of Evening Star pattern

 

More examples of trend continuation and reversal candlestick patterns in the following article: The main candlestick patterns