The Evening Star is a candlestick pattern that comes at the end of an uptrend and signals the beginning of a downtrend.
On the other hand, the Morning Star is a candlestick pattern that comes at the end of a downtrend and signals an upside reversal. Traders ought to be aware of these various trading patterns, with the Evening Star being the most crucial.
Because the appearance of the Evening Star implies that the uptrend is coming to an end, it is a warning sign to traders and a clear indication that this is the time to book profits.
This article will examine the formation of such an evening star pattern and how to trade it properly.
Evening Star Candlestick Pattern
Technical analysts use a candlestick pattern known as an “Evening Star” to determine when a trend is sure to reverse.
It comprises three candlesticks: a sizeable bullish candlestick, a small candlestick, and a bearish candlestick.
Evening Star patterns show up at the top of a price uptrend, indicating the end of the uptrend.
The Morning Star candlestick pattern suggests a bullish turnaround, which is the inverse of the Evening Star.
The Evening Star Candlestick Pattern is formed as follows:
Recognizing the Evening Star entails more than just identifying the three primary candles.
What is needed is to remain updated on the previous price action and where the pattern shows up within the current trend.
Determine an existing up-trend
The market must have higher highs and lower lows.
A large bullish candle
A sizeable bullish candle is a direct outcome of buying pressure and the continuation of the current uptrend.
Traders should only focus on long trades at this point because there is no indication of a reversal.
Small bearish/bullish candle
The second candle is small – often also referred to as a “Doji candle”; it represents the first indication of a fatigued uptrend.
This candle frequently gaps higher as it makes a more significant high.
The key message deciphered is that the market is somewhat undecided about whether the candle will be bearish or bullish.
A large bearish candle
This candle reveals the first accurate indication of new selling pressure. This candle gap is lower than the previous candle’s close and signals the beginning of a new downtrend.
Subsequent price action
Following a successful reversal, market participants will see lower highs and lower lows, but they should always take preventive measures against a failed move by using well-placed stops.
Evening Star Doji
When the market opens or closes at nearly the same level, Doji candles form.
This indecision candlestick pattern assists traders in raising a red flag and preventing further buying. The formation of a bearish candle after the Doji confirms the bearish trend.
What are the benefits and drawbacks of an evening star candlestick?
This candlestick pattern has both advantages and disadvantages. The Evening Star flag pattern chart frequently appears in charts and has well-defined entry and exit levels.
This candlestick pattern is simple to recognize because it frequently appears in the charts.
However, one should note that if it indicates a failed reversal, the price may rise further. The signal is confirmed when volume and other technical indicators support the evening star pattern, such as resistance level.
Points to note
- The candlestick pattern appears at the end of an uptrend and indicates that another uptrend is on the way.
- It’s a bearish candlestick pattern made up of three candles: a sizeable bullish candlestick, a small-bodied candle, and a bearish candle.
- The Evening Star pattern frequently appears in charts and has well-defined entry and exit levels.
