Evening star candlestick pattern is a bearish reversal pattern and occurs at top of a bullish trend. It consists of three candles and is the opposite of morning star candlestick pattern. The evening star candle pattern signifies weakening bulls and strong selling pressure. It provides a great opportunity for individuals to open short positions and profit from the upcoming downtrend. The evening star candlestick chart pattern is useful to alert forex, stock or Cryptocurrency trader to cut their losses or book their profits.
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The Key Notes for Evening Star Candlestick Pattern
- It is a three candle formation and is the opposite of the morning star pattern.
- It is a visual pattern with over 60% success rate.
- The formation works best in the daily time frame. Although, it can also come handy in hourly stock or Crypto charts.
- The pattern should appear in a bullish market, to signify the start of the reversal pattern.
How does the pattern candlestick come into formation?
The green or white candle: During the uptrend high optimism and positive market sentiment causes heavy buying. Buyers put in market orders to drive prices to new highs in hope for gaining profit. There is a visibly high volume on lower time frame charts and buyers hop in to ride the rally causing a bullish candle.
The Middle or Doji Candle: Price reaches a point where bulls exhaust and early entrant take their profit. The second candle represents a star with a short body. It signals a slowdown in buying pressure and the candle can either be green or red.
The Third Candle: Bears take control of the market and bearish candle emerges in the stock or Bitcoin’s chart completing the evening star candle formation. The price starts to fall, and the commodity enters a bearish market.
Trading Evening star candlestick pattern
The evening star candlestick reversal pattern is easy to spot. Besides, there is a high success rate of reversal after its occurrence. Any novice trader can come along with this pattern and use the visuals to cut down his losses or exit the market in profit.
As an example, the chart below shows the daily price action of popular Cryptocurrency Ethereum. It depicts the evening star candlestick reversal pattern and signifies its importance to the traders for shorting their positions.
Evening star candle is one of the extensively used visual patterns in Forex and Cryptocurrency trading. It helps traders to books their profits and exit the market. Besides, it suggests the current market trend has peaked and bulls are no more in control. Even though the success rate of this pattern is higher than 60%, traders still use different oscillators along with the pattern to conceive a wider picture.
Do you know: Bearish Abandoned Baby is similar to evening star candlestick pattern with one major difference.