The evening star is a three-candle bearish reversal pattern that forms after an uptrend. It signals that buying momentum is weakening and sellers could be taking over.
It is the mirror image of the morning star. First comes a long green candle, extending the rally. Next is a small-bodied candle, often gapping slightly higher, showing that buyers are losing steam. The third is a strong red candle that closes deep into the first candle’s body, ideally below its midpoint.
Picture a hypothetical stock rising from ₹300 to ₹380. On day one it closes at ₹380 with a large green body from ₹362. Day two forms a small candle around ₹384. Day three opens near ₹382 and drops to close at ₹365, below the midpoint of ₹371. Traders who hold long positions may tighten their stop-loss, and short-term traders may look for confirmation the next day.
Watch where it forms. An evening star right at a previous resistance level, or after a long, steep rally, carries more weight. If volume on the third candle is noticeably higher, that adds to the signal.
The usual mistake is acting on the second candle before the third one has closed. Wait for confirmation. We practise this kind of patience on real-time charts in our Technical Analysis course.