Evening star patterns are bearish reversal patterns. They are a three-candlestick pattern that takes place near resistance levels. The first candle is a bullish candlestick. The second candle is a smaller doji or spinning top that closes above the first bullish candle. The third candlestick is a bearish candle that closes below the second. Look for a break and hold below the third candle to complete the reversal.
What Is an Evening Star Pattern?
An evening star pattern consists of three candlesticks that form near resistance levels. The first candle is bullish, the second is a spinning top or doji, and the third is a bearish candlestick. Typically, the third candle forms a bearish reversal pattern.
Evening star patterns are three candlestick patterns found on stock charts. The evening star pattern is a bearish reversal pattern. Evening stars are a top reversal pattern for traders. When this pattern forms, it can be seen as a sign of bad things on the horizon.
They comprise three candlesticks. The evening star has a long, bullish candlestick. This signifies that the bulls are in control.
Evening Star Pattern Basics
Next comes a smaller candle that could be bullish or bearish. It’s typically a doji candle. Buyers and sellers had equal control that day. Hence, the indecision mode. It should close higher than the previous candle.
The last candlestick is then a long, bearish one. It should open near the middle of the second candle and close near the middle of the first candlestick in the pattern. The bears have now taken full control. While that may be the formation, it may not always look exactly like that.
Evening Star Pattern Trading Strategy
- Watch for 1st bullish candlestick to form.
- Next, watch for the 2nd smaller spinning top or doji candlestick to form.
- Then, watch for 3rd bearish candlestick to fall below the 2nd.
- Traders take a short position once the price breaks below the 3rd candlestick.
- Place a stop above the 3rd candle.
- Some traders take a long position once the price breaks above 3rd candle.
- Then, place the stop below the 3rd candle.
Evening Star Pattern Examples
This is an example of an evening star pattern on a daily chart of $DASH. Price had a very long uptrend, which created a rising wedge pattern. As the price moved to the apex of the rising wedge, you’ll notice it created a shooting star pattern. The second candle had a long upper wick and a large, real body. This signified that the bears were trying to push the price down.
Traders would take a short entry once the price fell below the shooting star candle and use the candle above that as a stop level. This example shows that the price reversed and went into a downtrend, creating a falling wedge pattern. This is where drawing trendlines is important. Lower highs and lower lows create the falling wedge. Higher highs and higher lows form the rising wedge.
Evening Star Breakout
The picture above is a daily chart of $UBER. The highlighted area shows an evening star pattern at the base of a downtrend. The third candlestick was bullish and not bearish. I wanted to show you this example because not all patterns look exact. That’s why it’s important to pay attention to where the pattern forms. This evening star formed at the base of a downtrend, and you’ll notice that it broke out.
So, the long downtrend was a falling wedge pattern, and then broke out into a rising wedge pattern. If the bullish candlestick was bearish then the pattern would have continued the trend downwards.
Dark Cloud Cover Example
This is an example of an evening star pattern on a chart of $NIO. The green lines are Fibonacci levels, which show major support and resistance levels. You’ll notice that the pattern almost resembles a dark cloud cover pattern, with part of the second candlestick covering the first. Then, the third bearish candle formed, and the price fell to the previous major support level.
A dark cloud cover can warn you that a star pattern is about to form. The second candle is bearish and shows that the bulls are losing control. The second candle couldn’t break above the previous bullish candlestick high, creating a double-top failure.
Final Thoughts on Dark Cloud Cover Pattern
Evening star patterns may be top reversal patterns, but can be hard to spot. Please always wait for confirmation before you jump into a trade. The confirmation happens when the third candlestick falls below and closes below the second candlestick. These patterns tend to form at the top of uptrends.
Many times, they are at the peaks of rising wedge patterns. They signal that the bulls are about to lose control, and the bears will take over. It is a reliable reversal pattern, but being aware of fakeouts is important. Please be sure to use proper risk management techniques when trading an evening star pattern.
Frequently Asked Questions
The evening star and evening doji star patterns are the same pattern. The only difference is that the evening doji star has a doji candle, whereas the evening star pattern could have a spinning top candle instead.
The evening star pattern is a three-candlestick bearish reversal pattern, and the dark cloud cover is a two-candlestick reversal pattern. The second candlestick covers half of the first candle with the dark cloud cover. The evening star's second candle is typically a doji or spinning top with a candlestick close above the preceding candle.
The evening star pattern is a fairly accurate pattern that has a 71% accuracy rate per Bulkowski's website.
An evening star is a bearish reversal pattern. The pattern is confirmed when the third candlestick has a bearish close below the second candlestick.
