An Evening Star pattern is a candlestick pattern which appears at the end of the uptrend and it indicates that a downtrend is about to occur. As it is an indicator of a downtrend, it appears as a red flag to traders and indicates that it’s time to book profits.
In This Article
· What is Evening Star?
· How to analyse chart using Evening Star?
· How to use Evening Star on Keev?
Category Trend
Type Leading
What is Evening Star?
An Evening Star is a bearish candlestick pattern made of three candles i.e large white candlestick, a small-bodied candle, and a red candle. It signals that the uptrend is about to end.
Its pattern is formed for three days.
The first day is of a large white candle which signifies a continuous rise in prices.
On the second day which is a smaller candle shows a more modest price increase.
On the third day, which shows a large red candle, opens at a price below the previous day and closes near the middle of the first day.
How to analyse chart using Evening Star?
Let's understand how to analyse a chart using an Evening Star. Here is a chart of Exxon Mobil (XOM) that shows an example of an Evening Star.
Day 1:- It reflects a strong bullish candle. The close was the same as the high.
Day 2:- It continues Day 1’s bullish trend by gapping up. But Day 2 is a Doji i.e candlestick indicating indecision. The bulls couldn’t continue the large rally of the previous day. They could close slightly higher than the open price.
Day 3:- It began with a bearish gap down. Exxon Mobil stock was bearish for the entire day. The open was the same as high and the close was the same as low. This is a clear sign of bearish sentiment.
Day 3 fell below the upward trendline. Both the trendline broke and the classic Evening Star pattern occurs giving traders an indication to sell short.