Evening Doji Star Pattern
The Evening Doji Star is a bearish reversal candlestick pattern that typically appears at the top of an uptrend. This pattern consists of three candlesticks and indicates a potential shift in market sentiment from bullish to bearish. The Evening Doji Star signifies indecision in the market, followed by selling pressure.
Characteristics of the Evening Doji Star Pattern:
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Formation: The pattern consists of three candlesticks:
- First Candle: A long bullish (green or white) candlestick that reflects strong buying pressure.
- Second Candle: A Doji candlestick that opens higher than the first candle’s close, indicating indecision in the market. The Doji can be either a traditional Doji or a Dragonfly Doji, but it must have a small body with long shadows.
- Third Candle: A long bearish (red or black) candlestick that opens below the second candle’s open and closes well below the second candle’s body, confirming the bearish reversal.
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Location: The Evening Doji Star typically occurs after a significant uptrend, signaling that the upward momentum may be weakening and that sellers could be gaining control.
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Signal: This pattern indicates that after a period of bullish sentiment (the first candle), the market experiences indecision (the Doji), and finally, strong selling pressure (the third candle) confirms a potential reversal.
Identifying the Evening Doji Star Pattern
To analyze and identify the Evening Doji Star pattern, follow these steps:
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Load the Chart for the Asset:
- Open the platform.
- Load the chart for the specific asset you wish to analyze.
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Set the Timeframe:
- Choose an appropriate timeframe that fits your analysis needs. Daily, weekly, or other longer intervals are generally more reliable for spotting the Evening Doji Star pattern.
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Select Candlestick Chart:
- Ensure that the chart type is set to “Candlestick” to visualize the patterns clearly.
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Use the Pattern Recognition Tool:
- Click on the FX Study section within the platform.
- Navigate to the Candlestick Pattern menu.
- Select the Evening Doji Star Pattern from the available list of patterns.
- The platform will automatically highlight occurrences of the Evening Doji Star pattern on your chart, making it easier to identify potential bearish reversals.
Use Case
The Evening Doji Star is a powerful three-candle bearish reversal pattern: a large bullish candle, a Doji that gaps above it (showing indecision at the top), and a large bearish candle that confirms the reversal. It is considered more reliable than the standard Evening Star due to the Doji’s indecision.
Strategy
Enter short after the third bearish candle closes, confirming the Evening Doji Star at a significant resistance level. Set stops above the Doji’s high. Target the next support level. Combine with RSI overbought readings for higher probability setups.
Common Mistakes
Do not trade the Evening Doji Star without a gap between the first candle and the Doji on true gapping markets. Avoid trading this pattern in the absence of a prior uptrend. Do not ignore that the third candle must close well into the first candle’s body to confirm the pattern.