Bearish 3-CandleHeuristic1 min read
◆ The PatternLong green → small star → long red — dusk after daylight
The Evening Star is the bearish mirror. First, a long green candle (buyers confident). Then a small star (indecision at the top). Finally, a long red candle (sellers overwhelm). Named because the evening star appears before nightfall.
Green (long) → Star (small, gapped) → Red (long)
The third candle should close below the midpoint of the first candle for a strong signal.
// Evening Star formation
Key insight: Evening Stars at resistance levels or after extended rallies are usually read as the stronger signals — they confirm the level and the exhaustion simultaneously.
Pattern bridge: The bearish mirror of morning star — hope, indecision, despair. In statistics, negative skew captures this tail of decline.
Worked example
Day 1 is a long green bar from 100 to 105. Day 2 has a small body (106 to 105.7) that gaps above it. Day 3 is red and closes at 101.5, below day 1’s midpoint of 102.5: an evening star.
The example data
The bars the example is worked on.
| Bar | Open | High | Low | Close |
|---|---|---|---|---|
| 1 | 100 | 105.5 | 99.5 | 105 |
| 2 | 106 | 106.5 | 105.2 | 105.7 |
| 3 | 105 | 105.2 | 101.2 | 101.5 |
Where it misleads
- As with the morning star, the exact thresholds decide how many you find.
- Gaps are rare on round-the-clock markets, so the pattern barely exists there.
- Its value as a stand-alone signal is not supported by tests on U.S. stocks (Marshall, Young & Rose 2006).
In code
d1, d2, d3 = df.iloc[-3], df.iloc[-2], df.iloc[-1] long_green = d1.close - d1.open > 0.6 * (d1.high - d1.low) small = abs(d2.close - d2.open) < 0.3 * abs(d1.close - d1.open) gap_up = min(d2.open, d2.close) > d1.close mid = (d1.open + d1.close) / 2 strong_red = d3.close < d3.open and d3.close < mid is_evening_star = long_green and small and gap_up and strong_red
Assumes import numpy as np, import pandas as pd, and a DataFrame df with columns open, high, low and close for the data above.
Sources
- Japanese Candlestick Charting Techniques, S. Nison, New York Institute of Finance, 1991
- B. R. Marshall, M. R. Young & L. C. Rose, “Candlestick technical trading strategies: Can they create value for investors?”, Journal of Banking & Finance 30(8), 2006 — they found none on Dow Jones stocks
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