The evening star pattern
occurs during a sustained uptrend. On the first day we see a candle with a
long white body. Everything looks normal and the bulls appear to have full control of the stock. Tn the
second day, however, a star candle occur. For this to be a valid evening star pattern, the stock must
gap higher on the day of the star. The star can be either black or white. A star candle has a small real
body and often contains a large upper shadow.
On the third day, a candle
with a black real body
emerges. This candle retreats substantially into the real body of the first day.
The pattern is made
more powerful if there is a gap between the second and third day’s candles. However,
this gap is
unusual, particularly when it comes to equity trading. The further this third
candle retreats into the
real body of the first day’s candle, the more powerful the reversal signal.
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