Evening Star
Candlefocus EditorThe evening star pattern is confirmed when the price action on the third day is below the closing level of the first day. This indicates that the bullish momentum that was in place has been reversed and the direction of movement is now bearish going forward.
Traders use the evening star pattern to anticipate bearish reversals, or when they want to close out a long position and move to a short position. They can also be used to anticipate a drop in momentum and therefore set appropriate stop losses.
The pattern is composed of three individual candlesticks. The first is a large white or green body, indicative of buying pressure, which may be the result of a bullish trend. The second candle is a small body, which can be either green or red, of either a bullish or bearish nature, depending on the prior trend. Finally, the third candle is a large red or black body, which signifies a bearish trend.
It is important to note that although the evening star pattern is typically seen as a bearish reversal indicator, it can also be a sign of a short-term pullback within a longer-term trend. When used in this way, it can be used to identify buying opportunities or to set stop-losses.
The evening star pattern is a reliable technical indicator and can be used as a powerful tool in trading. By understanding the pattern and its components, traders can better anticipate reversals and use it to their advantage.