Evening Star

Evening Star

• Direction: Bearish
• Type: Reversal
• Reliability: Strong


Evening Stars start with a continuation of the bullish move. The second day sees a continuation of the move up, but a sell-off makes the market close at or near the open for the day. The first two candles meekly suggest a loss of bullish momentum. In fact up to day two this formation matches the Bearish Shooting Star weak-to-moderate strength reversal pattern.

Although the example above is a blue shooting star, the shooting star can really be any color.

Bearish Shooting Stars alone are decent signals for additional sell-offs on day three. Since the certainty for a shooting star indicator is low, the trend reversal should be confirmed by a red candlestick the next day.

Thus Bearish Evening Stars require on day three a sharp sell-off after the market open. Analysts want day threes high to be near equal to its open price, suggesting the market sell-off has no uncertainty in the new direction.

With this pattern watch for sells offs the follow days.

In non-FX markets gaps are quite common, and Evening Stars traditionally require a gap between the first and second day. In fact the wider the gap from day two to three the better the signal in non-FX markets, since the higher day-two goes the stronger day-threes bearish move is.

Because FX offers 24 hour trading, no gaps should be expected. The Forex Market version of this formation would share the same market close price on day one, and then start day twos rally from there. Day twos close would be the same whether in FX or any other market restricted to fixed exchange hours. The formation would tend to see a shooting start on day two. Thus this formation might more aptly be called Evening Shooting Stay when applied to the Foreign Exchange Market.