Evening Star

What is an 'Evening Star'

An evening star is a bearish candlestick pattern consisting of three candles that have demonstrated the following characteristics: the first bar is a large white candlestick located within an uptrend; the middle bar is a small-bodied candle, red or white, that closes above the first white bar; and, the last bar is a large red candle that opens below the middle candle and closes near the center of the first bar's body. This pattern is used by traders as an early indication the uptrend is about to reverse.

Evening Star

BREAKING DOWN 'Evening Star'

There are two different sides of stock analysis: fundamental and technical. Fundamental analysts rely on company performance, including trends in sales and net income, to provide insights about the direction of stock prices. Technical analysts rely on price patterns to provide insights about the direction of stock prices. One tool technical analysts use to help identify patterns is the candlestick chart. Charts provide an illustration of price action that gives traders the ability to identity trade pattern opportunities visually. Some of these opportunities are bullish, or buying opportunities, while others are bearish, representing selling opportunities.

Bearish Reversals

There are many different bearish candlestick patterns including the bearish harami, the dark cloud cover, the shooting star and the bearish engulfing. One of the most popular reversal bearish patterns is referred to as the evening star formation.

Evening star formations can be useful in determining trend changes, particularly when used in conjunction with other indicators. Many traders use price oscillators and trendlines to confirm this candlestick pattern.

The Evening Star

A candlestick requires a certain amount of information about a stock. You need to know the open, high, low and close price for the stock over the time period you want to analyze. Each candlestick consists of a candle and two wicks. The length of the candle is a function of price high and lows within the given time period. A long candle indicates a large change in price, while a short candle indicates a small change in price. In other words, long candlestick bodies are indicative of intense buying or selling pressure, depending on the direction of the trend. At the same time, short candlesticks are indicative of little price movement.

The evening star is a candlestick pattern containing two long candles and one short candle. The first candle in the pattern is a long bullish candle, indicating a long move up. The second candlestick in the pattern is a short candlestick indicating price consolidation and indecision. In other words, the trend that created the first long, bullish candlestick is losing momentum. The final candlestick is a long bearish candlestick gaping lower than the previous candlestick, indicating a confirmation of the reversal and the beginning of a new trend down.

RELATED TERMS
  1. Morning Star

    A bullish candlestick pattern that consists of three candles ...
  2. Rising Three Methods

    A bullish candlestick pattern that is used to predict the continuation ...
  3. Bearish Abandoned Baby

    A type of candlestick pattern that is used by traders to signal ...
  4. Falling Three Methods

    A bearish candlestick pattern that is used to predict the continuation ...
  5. Bearish Harami

    A trend indicated by a large candlestick followed by a much smaller ...
  6. Bullish Abandoned Baby

    A type of candlestick pattern that is used by traders to signal ...
Related Articles
  1. Trading

    Star Formations Spotlight Luminary Trades

    Morning, evening and doji stars will have you basking in better trading profits.
  2. Trading

    Using Bullish Candlestick Patterns To Buy Stocks

    These five popular candlestick chart patterns signal a bullish reversal in downtrend.
  3. Markets

    The 5 Most Powerful Candlestick Patterns (NUAN, GMCR)

    Statistics show unusual accuracy for the buy and sell signals of certain candlestick patterns like abandoned baby, evening star, and three black crows.
  4. Trading

    Candlestick Charting: What Is It?

    Discover the components and basic patterns of this ancient technical analysis technique.
  5. Trading

    Candlesticks Light The Way To Logical Trading

    Crowd psychology is the reason this technique works. Find out how to make it work for you.
  6. Trading

    Candlesticks And Oscillators For Successful Swing Trades

    Take advantage of short-term price moves by pinpointing reversals.
  7. Trading

    Advanced Candlestick Patterns

    Go beyond the basics! Learn to identify and trade island reversals, kicker patterns and more.
  8. Trading

    Tales From The Trenches: Location Is Everything

    When a candle pattern re-occurs near a moving average, it may indicate future support or resistance.
  9. Trading

    Western Line Vs. Candlestick Charting

    These methods both have their merits, but they may be strongest when combined.
  10. Trading

    Candlestick Charting: Perfecting The Art

    Take a look at continuation patterns and how they can confirm or deny trends.
RELATED FAQS
  1. How do I Implement a forex strategy when spotting a Morning Star pattern?

    Learn how to design a forex trading strategy to use for trading the morning star candlestick pattern, an indicator of a bullish ... Read Answer >>
  2. Are continuation patterns most useful when looking at Candlesticks?

    Learn the basics of using candlesticks to confirm continuation or reversal patterns and the vital role this plays in establishing ... Read Answer >>
  3. How do I build a profitable strategy when spotting an Evening Star pattern?

    Create a trading strategy designed to take advantage of the evening star candlestick pattern indication of a market reversal ... Read Answer >>
  4. How do I build a profitable strategy when spotting a Star pattern?

    Learn how to implement a profitable trading strategy based on the occurrence of either the morning or evening star candlestick ... Read Answer >>
  5. How do I implement a forex strategy when spotting a Star Pattern?

    Learn a simple forex trading strategy designed to take advantage of market reversal indications given by three star candlestick ... Read Answer >>
  6. How do I build a profitable strategy when spotting a Morning Star pattern?

    Create a profitable trading strategy to use when spotting a morning star candlestick pattern that indicates a bullish market ... Read Answer >>
Hot Definitions
  1. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  2. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  3. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  4. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  5. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  6. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
Trading Center