Business, Legal & Accounting Glossary
An evening star is a candlestick trading pattern that traders consider a reliable signal of a bearish reversal. A long white candle, followed by a very short candle that gaps above the white candle (i.e. 1st gap), followed by a long black candle that gaps below the short candle (i.e. 2nd gap), characterizes the evening star. Although the 2nd gap is not required for an evening star pattern to be valid, an ideal evening star pattern would typically have both gaps. In currency trading, however, given the 24-hour trading environment (i.e. day 1 closing price=day 2 opening price), the evening star pattern tends to manifest without any gaps. The short second candle of the evening star may either be white or black. A short candle suggests buying pressure is weakening and selling pressure has started to assert itself. The third candle of the evening star is considered confirmation of the reversal. Expert traders believe the evening star is most reliable when it occurs after an uptrend. The evening star pattern is very similar to the bearish abandoned baby which has a doji rather than a short candle as its second candle. The bullish counterpart of the evening star is the morning star.
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This glossary post was last updated: 9th February, 2020 | 0 Views.