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What is Evening Star Candlestick Pattern

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Published Date: 10 Aug 2023Updated Date: 10 Aug 20236 mins readBy MOFSL
evening star candlestick pattern

Introduction

  • It is important to learn about the evening star candlestick pattern if you are interested in trading the financial markets.
  • It is a bearish reversal pattern that helps you identify potential turning points in an uptrend.
  • This article will discuss its concept and usage in trading strategies.

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What Does the Evening Star Candlestick Pattern Signify?

  • Technical analysts commonly utilize the evening star candlestick pattern to predict future price reversals to the downside.
  • This pattern consists of three candles: a large positive candle, a small-bodied candle, and a negative candle.
  • The evening star patterns appear at the top of an ascending price trend and signal that the trend is about to reverse.
  • The opposite of the evening star pattern is known as the morning star pattern. This pattern indicates a bullish reversal

How Do I Trade With the Evening Star Candlestick Pattern?

  • The evening star candlestick pattern has three candles, as shown in the above chart.
  • The second one (candle 3) is small and shows uncertainty and a slowing uptrend.
  • The third one (candle 4) is large and signals selling pressure by the bears.
  • Traders can enter a sell position at the opening of the next bearish candle.
  • They can place their target at the previous support level (below the current level) and stop loss at the previous resistance level (above the current level).
  • It’s important to maintain a positive risk-to-reward ratio and seek the required expert guidance from professionals like Motilal Oswal.

What are the Pros and Cons of the Evening Star Candlestick Pattern?

  • One key advantage of this pattern is that it occurs frequently in the charts and presents well-defined entry and exit levels.
  • Also, it is easy to identify as it occurs frequently in the charts. If the reversal fails, the price may continue to rise instead of going down.
  • The signal is confirmed when this pattern is backed by other technical indicators like RSI and volume. It’s important to note that this pattern is not always reliable.
  • Therefore, it should be used in combination with other technical indicators.

Conclusion

  • The evening star candlestick pattern is a bearish reversal pattern, consisting of three candles.
  • The first candle is a large positive candle, the second candle is small and either bullish or bearish, and the third candle is a large negative candle.
  • The pattern occurs frequently in the charts and provides clear entry and exit points for traders.
  • However, it is important to note that the pattern is not always reliable and should be used with other technical indicators.

 

Related Articles: Difference Between Blue and Red Ocean Strategies | Factors to Keep in Mind While Opening a Demat account | Factors to Consider When Opening a Demat Account | What is trading on equity

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Disclaimer: The stocks, companies, or financial instruments mentioned in this blog are for informational purposes only and should not be considered as investment recommendations. It is advised to consult with your financial advisor before making any investment decisions. Investment in securities markets are subject to market risks, read all the related documents carefully before investing. Investors are strongly encouraged to carefully read the risk disclosure documents prior to participating in market-related investments or trading activities. Due to the volatile nature of financial markets, no guarantees can be made regarding investment returns. Motilal Oswal Financial Services Ltd. does not offer any assured returns on market-linked securities. Please note that past performance of stocks or indices is not indicative of future results.
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