Evening Star

The Evening Star is a bearish candlestick pattern that is used in technical analysis to predict a potential reversal in an uptrend. It's a three-candlestick pattern and is considered a reliable indicator of a coming top in the market.

The bullish version of the Evening Star pattern is the Morning Star candlestick pattern.

Here's a breakdown of the Evening Star pattern:

  1. The first candle is a long bullish (green or white) candle, which occurs at the end of an uptrend.

  2. The second candle is a small-bodied candle (the color is not significant), that gaps above the close of the first candle. This candle can be a Doji, which is a candle where the opening and closing prices for the period are the same, or very close to the same.

  3. The third candle is a long bearish (red or black) candle that closes well into the first candle's body. Ideally, it should close below the midpoint of the first candle.

This pattern represents a shift in momentum from the bulls to the bears. The market's move upwards is losing steam (as seen by the small body of the second candle), and then the sellers take over (as represented by the strong bearish third candle).

As always, it's best to use this pattern in conjunction with other forms of technical analysis to confirm the potential for a reversal. The reliability of the Evening Star pattern increases when it's followed by a gap down or a large bearish candle. The more the third candle penetrates the first candle, the higher the likelihood of a reversal.

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