The Evening Star mirrors the Morning Star but indicates a potential top. It begins with a strong bullish candle, followed by a small indecision candle, and ends with a bearish candle closing below the midpoint of the first bar.
The algorithm watches sequences of three candles. When the pattern forms, it enters short with a stop above the small middle candle's high. Positions exit once price drops beneath the confirmation candle's low or if the stop is triggered.
Since the setup anticipates a quick reversal from overbought conditions, trades typically aim for short, momentum-driven moves lower.
- Entry Criteria: Three-candle Evening Star pattern.
- Long/Short: Short only.
- Exit Criteria: Price below confirmation bar low or stop-loss.
- Stops: Yes, above middle candle high.
- Default Values:
- CandleType = 5 minute
- StopLossPercent = 1
- Filters:
- Category: Pattern
- Direction: Short
- Indicators: Candlestick
- Stops: Yes
- Complexity: Intermediate
- Timeframe: Intraday
- Seasonality: No
- Neural networks: No
- Divergence: No
- Risk level: Medium