Evening Doji Star
The Evening Doji Star is a three-candlestick pattern used in technical analysis to predict the reversal of a bullish trend. It is considered a bearish reversal pattern and is formed by a long white candle, followed by a Doji candle, and then completed by a long black candle.
How the Evening Doji Star Works
The first candle in the Evening Doji Star pattern is a long white candle, indicating a strong uptrend. The second candle is a Doji, which has a small real body and represents indecision in the market. The third candle is a long black candle, which opens below the previous day’s close and closes well into the real body of the first candle.
Interpreting the Evening Doji Star
The Evening Doji Star pattern suggests that buyers are losing control and that a potential reversal is imminent. The long white candle shows that bullish sentiment is still present, but the Doji signals uncertainty. The following black candle confirms the reversal, as it opens lower and closes below the midpoint of the first candle.
Traders use the Evening Doji Star pattern as a signal to sell or short a security, as it indicates that the bullish trend may be coming to an end. To confirm the pattern, traders often look for a gap down on the third candle or a decrease in volume, which further supports the reversal.
Limitations of the Evening Doji Star
While the Evening Doji Star pattern can be a reliable signal of a trend reversal, like any technical analysis tool, it is not foolproof. Traders should always consider other indicators and factors when making trading decisions. It is also important to wait for confirmation of the pattern before taking action, as false signals can occur.