Evening Star is a three candle reversal pattern. This pattern usually appears on top of an uptrend and signals for a reversal. The reversal could actually be a correction in the trend or a complete reversal to a new trend (see image).
The first candle of the pattern is always bullish. The second candle has a small real body and could be bearish or bullish. The third candle is always bearish. The body of the first and third candle is usually long. The most important characteristic of the Evening Star formation is that the real body of the second candle must lie above the real body of the first candle. In other words the real body of the second candle does not overlap the real body of the first candle. It could be above the upper shadow of the first candle or overlap with it.
Evening Star in Downtrend
Sometimes Evening Start appears in a downtrend. In such cases the pattern appears after a short correction in the trend and represents the continuation of the trend. In other words Evening Start is a good sign of the continuation of the downtrend due to its bearish implications (see image).
I strongly recommend to use other technical tools to confirm the signals generated by candle patterns.
Locating Evening Star Formation in a Chart
The main problem with locating Evening Star is the subjective definition of the pattern (just like Morning Star). I made some assumptions to help my custom indicator locate such patterns in a chart. For example I assumed that the size of the middle or rather second candle must be less than half the size of any of the other two candles. I also assumed that side candles (i.e. candle 1 and 3) must be at least 5 pips. The following image shows a sample pattern which is located by this indicator.
The indicator places three down arrows above the candles to locate the pattern.
Download the EveningStar Indicator [download]
Click here to download the compiled version of this indicator. I have designed the indicator for MetaTrader 4 (MT4). If you are not using the latest build of MT4 then you may encounter technical problems. Click here for more information and possible solutions.
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