Relevance: Bearish
Prior Trend: Bullish
Reliability: High
Confirmation: Suggested
No. of Sticks: 3
Definition:
This is a major top reversal pattern formed by three candlesticks. The first candlestick is a long white body; the second one is a small real body that may be white. It is characteristically marked with a gap in higher direction thus forming a star. In fact, the first two candlesticks form a basic star pattern. Finally we see the black candlestick with a closing price well within first session’s white real body. This pattern clearly shows that the market now turned bearish.
Recognition Criteria:
1. Market is characterized by uptrend.
2. We see a long white candlestick in the first day.
3. Then we see a small candlestick on the second day with a gap in the direction of the previous uptrend.
4. Finally we see a black candlestick on the third day.
Explanation:
The market is already in an uptrend when the white body appears which further suggests the bullish nature of the market. Then a small body appears showing the diminishing capacity of the longs. The strong black real body of the third day is a proof that the bears have taken over. An ideal Bearish Evening Star Pattern has a gap before and after the middle real body. The second gap is rare, but lack of it does not take away from the power of this formation.
Important Factors:
The stars may be more than one, two or even three.
The color of the star and its gaps are not important.
The reliability of this pattern is very high, but still a confirmation in the form of a black candlestick with a lower close or a gap-down is suggested.
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