Bearish Reversal Pattern
Many people are unaware of how much traders and analysts depend on stock chart patterns to help them make educated decisions about what will happen with their stocks in the future. Centuries ago, when they were first getting involved in the trading of rice securities, the Japanese found that charting out each day’s opening and closing prices for their stocks could help them to detect patterns in the market. These charts became known as candlesticks, and the evening star is a signal that is often seen in these kind of charts when a downtrend is about to begin..
Candlestick charts are made up of bar shaped icons that can be white, red, black, or other colors depending on the charting software. The body of the candlestick indicates the day’s opening and closing prices and the lines coming out of the body indicate the entire range of prices that were reached on that particular trading day. .
Looking for the evening star on the stock charts is easy once you’re more familiar with its identifying characteristics. This pattern is bearish in nature and must consist of three candles, meaning that it takes at least three days for you to spot it. The first thing you have to look for is a large white candlestick that appears inside an uptrend. Then, look for a second smaller candlestick with a red or white body that reaches a closing price that is above the first white candlestick. The final candlestick to look for will be a large red point with an opening price that is below the middle candle’s yet still closes around the center of the first candlestick’s body.