Evening Star Candlestick Formation

Written By
Paul Tracy
Updated November 4, 2020

What is an Evening Star Candlestick Formation?

The bearish evening star candlestick formation is a major reversal candlestick pattern.

How Does an Evening Star Candlestick Formation Work?

In many cases, only one candle is necessary to put a trader on high alert that a reversal may be happening. For example, a doji candlestick -- whether it occurs after a long uptrend or downtrend -- indicates that supply and demand are in equilibrium. Therefore, it implies that the recent trend may be coming to a conclusion. 

Several major reversal patterns consist of two candlesticks. For example, a bullish or bearish engulfing candle often signals that a trend is winding down. This two-candle pattern is also relatively easy to spot.

The evening star consists of three candles. Because they must be viewed together as a group, this is a more difficult pattern to discern. Unlike most other candle formations, no further confirmation is needed. The evening star is complete in and of itself.

The evening star pattern occurs during a sustained uptrend. During the first period -- be it a day or a week -- a candle with a long white body appears. At this point, the bulls appear to have full control.

On the second period, however, a black or white star candle occurs. A star candle has a small real body and often contains a large upper shadow. For this to be a valid evening star pattern, the stock or index must gap higher on the period of the star.

The star communicates that the bulls and bears are involved in a tug of war, where neither side is winning. After a sustained uptrend, it shows that those who want to take profits have come into balance with those still eager to buy the stock. A large upper shadow indicates that the stock could not sustain its probe into new high ground -- thus signaling a potential reversal.

On the third period, a candle with a black real body emerges. This candle should retreat substantially into the real body of the first period. The pattern is made more powerful if there is a gap between the second and third period's candles. However, this gap is unusual, particularly when it comes to equity trading. As such, it is not a required part of the pattern.

The further this third candle retreats into the real body of the first candle, the more powerful the reversal signal. Since the third period affirms the star's potentially bearish implications, no further confirmation is needed.

The chart of the Nasdaq Composite Index below illustrates the Exchangeable bondsening star formation:

Why Does an Evening Star Candlestick Formation Matter?

When looking at any given stock chart, keep a sharp eye out for the evening star candlestick pattern. An evening star usually signals that a peak has been seen. Therefore, it provides the trader an opportunity to marginate his or her long position and possibly initiate a short position.

Activate your free account to unlock our most valuable savings and money-making tips
  • 100% FREE
  • Exclusive money-making tips before we post them to the live site
  • Weekly insights and analysis from our financial experts
  • Free Report - 25 Ways to Save Hundreds on Your Monthly Expenses
  • Free Report - Eliminate Credit Card Debt with these 10 Simple Tricks
Ask an Expert
All of our content is verified for accuracy by Paul Tracy and our team of certified financial experts. We pride ourselves on quality, research, and transparency, and we value your feedback. Below you'll find answers to some of the most common reader questions about Evening Star Candlestick Formation.
Be the first to ask a question

If you have a question about Evening Star Candlestick Formation, then please ask Paul.

Ask a question

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.

If you have a question about Evening Star Candlestick Formation, then please ask Paul.

Ask a question Read more from Paul
Paul Tracy - profile
Ask an Expert about Evening Star Candlestick Formation

By submitting this form you agree with our Privacy Policy

Don't Know a Financial Term?
Search our library of 4,000+ terms