Japanese Candlestick Analysis
figure 14.25 An Evening Star Formation.Description:■ (^) The evening star formation is a triple candlestick reversal pattern. See Figure 14.25.
■ (^) The first candlestick should be a strong bullish candlestick followed by a small‐
bodied candlestick like a spinning top gapping up above the first candlestick.
The third candlestick gaps down below the second candlestick and is bearish.
■ (^) The upper and lower shadows are not significant.
■ (^) It is best found in a protracted uptrend that is beginning to display weakness.
■ (^) Its corresponding bullish version is the morning star formation.
Psychology:
■ (^) The evening star formation begins as a bullish candlestick where buyers ag-
gressively drive the price up. The price gaps up but halts, indicating that the
sellers are now putting a cap on prices. The buyers begin to lose confidence
and start to retreat. The sellers subsequently drive prices down, showing that
the bears are now in control.
Trigger, Stoploss, and Confirmation:
■ (^) The trigger is at the low of the first candlestick.
■ (^) To confirm the reversal, price needs to close below the trigger level.
■ (^) The stoploss is placed at the high of the second candlestick or pattern.
■ (^) A buystop entry order may be placed at the high of the second candlestick
only if there is evidence that the trend is still in effect.
See Figure 14.26.
evening star