Evening Star Pattern: A Bearish Reversal Candlestick

An evening star is a three-candle bearish reversal pattern used in technical analysis to signal the potential end of an uptrend. It typically appears at or near price peaks and suggests that bullish momentum is weakening and sellers are gaining control. The bullish counterpart is the morning star, which signals potential upward reversals.

How the pattern forms

The evening star unfolds over three trading periods:

1. Large bullish candle (white/green)
2. Confirms the existing uptrend with strong buying pressure.
3. Small-bodied candle (spinning top or doji)
4. Shows indecision or waning momentum; may gap higher or form within/near prior candle.
5. Large bearish candle (black/red)
6. Opens below the second candle and closes well into the body of the first candle (ideally below its midpoint), signaling a shift to selling pressure.

Gaps between candles are common but not required. Higher volume on the third candle strengthens the signal.

Why OHLC matters

Candlesticks encode:
– Open: first traded price of the period
– High / Low: extremes during the period
– Close: final traded price of the period

For an evening star, the relative positions of these opens and closes across the three periods indicate the transition from buyers to sellers.

Confirmations and complementary tools

Because patterns can appear in noisy data, traders commonly confirm an evening star with additional indicators:
– Volume: rising on the third candle supports bearish conviction.
– RSI or Stochastic: bearish divergence or overbought readings add weight.
– MACD: a bearish crossover or loss of momentum helps confirm trend change.
– Trendlines / support levels: a close below a trendline or break of support reinforces the reversal.
– Moving averages: a rejection or cross below a key moving average can help validate the signal.

Use multiple confirmations rather than relying on the pattern alone.

Variations and related patterns

• Middle candle as a doji: stronger indecision signal; sometimes called an evening doji star.
• Dark cloud cover and bearish engulfing: other bearish reversal patterns with different structures and confirmation requirements.

Example (illustrative)

• Uptrend in place.
• Day 1: long white candle (strong bulls).
• Day 2: small doji near the high (indecision).
• Day 3: long red candle closing below the midpoint of Day 1 and breaking a short-term trendline with higher volume.
  Traders may consider reducing long exposure, placing a stop above the pattern high, or initiating short positions if other confirmations align.

Common mistakes and cautions

• Misreading the pattern in choppy, sideways markets.
• Treating any three-candle sequence as an evening star without checking size, position, and volume.
• Ignoring broader market context and higher time-frame trends.
• Failing to use risk management (stops, position sizing).

Key takeaways

• The evening star is a three-candle bearish reversal pattern that flags potential tops.
• Stronger signals occur when the third candle closes into the first candle’s body (preferably below its midpoint) with confirming volume and momentum indicators.
• Always combine the pattern with other technical tools and sound risk management before trading the signal.