Japanese candlesticks - Evening star
Definition: The evening star structure consists of three Japanese candlesticks. The first is a large, full (green), bullish candlestick followed by a small bullish or bearish candlestick which closes above the first candlestick. The third candlestick is a large, full (red), bearish candlestick.
Characteristic: The evening star structure often forms after a significant rise characterized by several large, red Japanese candlesticks.
Significance: The evening star is a reversal pattern, it indicates a downward trend reversal. The second candlestick reflects the inability of buyers to support the bullish movement, there is a lack of momentum and sellers eventually regain control.
Note: There are many variations in the second candlestick with this pattern. It can be separated from the other two (abandoned baby structure) or take the form of a doji (doji evening star). Regardless of the opening and closing levels, the important thing is that the candlestick’s body is small.
Doji evening star
Invalidation: If the next candlestick is not bullish or does not open on a bullish gap, the evening star structure is invalidated.