Tutorial on Evening Star Candlestick Pattern

Evening Star Candlestick Chart pattern is a bearish reversal pattern of high reliability. This pattern is only valid when formed at an uptrend or at a possible support. This pattern is just opposite of Morning Star Candlestick Pattern. This pattern is also a three day pattern or formed by three continuous candlestick of following characteristic.

Day 1: On first day, a large bullish candlestick is formed, representing further continuation of an uptrend.
Day 2: On second day, a small candlestick either bullish or bearish, is formed which gaps up from the first candlestick formed on Day 1.
Day 3: On third day a large bearish candlestick is formed which gaps down from the candlestick formed on Day2. It opens higher then the close of the Day 2 candlestick and closes atleast near or above the centre or midpoint of the candlestick formed on Day 1.

For this pattern to be formed it is extremely important:

a. It should formed in an uptrend.
b. The open price of the Day 2 candlestick is lower than the close price of Day 1 candlestick.
c. The close price of the Day 2 candlestick is also lower than the open price of Day 1 candlestick.
d. The close price of the Day 3 candlestick is higher the close price of Day 2 candlestick and should be atleast cover 50% or more of the Day 1 candlestick.

The strength of this pattern depends a lot on the size of the candlestick. The bigger bullish candlestick formed on day 1 in continuation of previous uptrend, shows the market sentiments is strongly under the control of bulls.
The second day formation of small candlestick (either bullish or bearish or neutral) with a gap up indicates that the bulls are still holding the position but they are not able to push the price much higher, further indicates that the bears strength is loosening. A bearish candlestick on day 2 speaks a lot more about bulls weakness.
Formation of long bearish candlestick on Day 3 confirm evening star pattern and shows that bears are taking over the market over the bulls with strength. If the third day candlestick opens with a gap down and closes below or atleast near the midpoint of the Day 1 candlestick body, it indicates a strong trend reversal and a sell signal.

Evening Star Candlestick Chart Pattern by itself is useful in confirming trend reversal but one has to see the overall market and other technical indicators for its strength and reliability.

Precautions to be taken while utilizing this Pattern:

1. It is important to reconfirm the pattern by integrating this pattern with the study of other technical indicators. Many traders also use price oscillators such as the MACD and RSI or Volume to confirm the reversal. Others uses the size of the candlestick to see the reliability of this patten. Therefore adding any other technical indicator with this candlestick pattern, one can further enhance the probability of the pattern reliability.
2. Like if this pattern is formed at the top of a downtrend together with oversold condition then it further strengthen strong sell signal. If it is formed in an downtrend or in a sideways market it is of little significance.

Now we have learnt what is Evening Star Candlestick pattern, it is the time to see them in real life. Our website provides free Evening Star Candlestick pattern. It can be found at this link
Corresponding Patterns of Evening Star Candlestick Pattern is as follows:
1. Evening Doji Star
2. Doji

Example of Evening Star Candlestick Formed By Bank Of India

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