To identify an Evening Star pattern, look for the following criteria:
- The Evening Star consists of three candlesticks, with the middle candlestick being a star.
- The first candlestick in the Evening Star must be an up candle (white or green) and must have a large body.
- The second candlestick is the “star”, which is a candlestick with a short body and does not touch the body of the first candlestick.
- The gap between the bodies of the two candlesticks is what makes the Doji or Spinning Top a “star”.
- The star can also form within the upper shadow of the first candlestick.
- The star is the first indication of weakness as it indicates that the buyers were unable to push the price up to close much higher than the close of the previous period.
- This weakness is confirmed by the candlestick that follows the star.
- The third candlestick must be a dark candlestick that closes well into the body of the first candlestick.
A downward breakout occurs when the price closes below the bottom of the three-candlestick pattern.
Since the price in the last candle is already near the low, a downward breakout is expected.
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