Bearish Evening Stars are a rare reversal pattern that offers one of the strongest bearish reversal signals in the Forex Market. Evening Star formations are characterized by a continuation of a bullish trend followed by a Doji reflecting uncertainty in the strength of trend.
Up to day two we actually have a Doji Star formation, a moderate strength bearish reversal pattern. After the day of indecision, the trend reversal is confirmed when a sell-off creates the large bearish candle. The stronger the move down on day-three, the stronger the reversal signal. Watch for additional bearish price action in the next few days.
In FX this formation practically identical to the bearish Abandoned baby. In non-FX markets Candlestick analysts traditionally look for gaps to signal the strength of the Evening Doji Star pattern. Gaps between the close price and open price are very common outside efficient FX markets, since exchanges are traditionally limited to very short trading periods. Because Foreign Exchange trades 24 hours, gaps are very uncommon and need to be ignored in identifying Evening Star patterns.
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