Evening Star Pattern

An evening star is a price action based bearish reversal candlestick pattern used by technical analysts and financial traders.

The pattern itself is composed of three candles, and is used to spot the end of a bullish trend and the beginning of a bearish trend.

The evening star pattern can be used in any financial market, including stocks, foreign exchange and commodities.

The pattern possesses the following three attributes, a) an initial long up bar following a strong uptrend, b) a second bar, whether up or down, much smaller than the previous bar, and c) A long down bar which closes around the midway point of the body of the first bar.

Even though the evening star pattern isn’t as oft occurring as other patterns that detect trend changes, it is one of the most powerful reversal candlestick patterns around.

The evening star pattern can be applied to virtually any market, on any instrument and on any timeframe.

However, as with all candlestick patterns, the higher the timeframe, the more powerful the setup.

How to Trade the Evening Star Pattern

The evening star actually has two distinct patterns depending upon which market one is trading.

In the forex market, there is no gap between the candlesticks (since it’s a twenty-four-hour market gaps are rare, apart from resumption of trading on Sunday evenings).

However, in markets outside of forex, such as in stocks, gaps occur more frequently.

In such markets, traders acknowledge an evening star pattern if there is a price gap between the first and second candles, and between the second and third candles.

Larger gaps indicating stronger reversal potential. Traders using the evening star pattern often wait for a bearish breakout to occur before committing any investment.

This indicates reduced risk of entering a failed reversal, since the pattern on its own does require confirmation.

In addition, checking for divergence using classic overbought/oversold oscillators is frequently employed. Traders also use the evening star pattern to seek out resistance zones.