The Evening Star is a chart pattern consisting of three technical lines. It usually appears when the stock price is in an uptrend and is a reversal pattern.
In simple terms, based on the technical line pattern, the Morning Star is a bearish pattern.
It is composed of a long white candlestick, a small candlestick (white or black), and a long black candlestick. The pattern looks like a sunset in a bright starry sky. The Evening Star is usually considered a sell signal, indicating that the stock price may reverse and fall.
Generally, the Evening Star has the following characteristics on the technical line:
The Evening Star usually consists of three technical lines and has the following features:
Long white candlestick: In an uptrend, a long white candlestick appears first, representing the dominance of buyers in the market, pushing the stock price up.
Small candlestick (white or black): A small white or black candlestick appears next. Its body is smaller than the first candlestick, indicating a more balanced power between buyers and sellers and possible price fluctuations.
Long black candlestick: Finally, a long black candlestick appears. Its body is more than half the length of the first candlestick, representing the dominance of sellers in the market, pushing the stock price down.
The combination of these three lines forms the Evening Star pattern, indicating a potential downtrend in the stock prices.
Let me give you an example to better understand the Evening Star:
1.Tencent Holdings (00700.HK):
On June 7, 2018, after a period of an uptrend, Tencent Holdings formed an Evening Star pattern at the top of the range, indicating a potential reversal in the stock price. The stock price of Tencent subsequently dropped for a period of time.
2.NVIDIA (NVDA):
On March 29, 2022, after a period of uptrend, NVIDIA formed an Evening Star pattern at the top of the range, indicating a potential reversal in the stock price. The stock price of NVIDIA subsequently continued to decline.
In investing, the Evening Star pattern is usually considered a sell signal. Therefore, you need to pay attention to the following two points:
Confirm the trend: The Evening Star pattern is only a technical indicator. If you do not analyse it in combination with the overall trend of the stock and the market situation, there may be risks relying solely on the pattern judgment.
Risk control: If you see an Evening Star pattern in the stock you are interested in, you need to consider risk control, such as setting a stop-loss or reducing your position.
Finally, I need to remind you that technical lines can only assist us in stock trading. No single pattern indicator can be absolutely correct.
That's all about the knowledge of the Evening Star technical pattern!
