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«Evening star» — is exactly the opposite of the Morning Star signal. «Evening star» — is a top reversal signal. It consists of three candlesticks - a long-bodied white candle extending the current uptrend, a short middle candle that gapped up on the open, and a long-bodied black candle that should close at least halfway down the white candle. (Figure 1).
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Figure 1. Reversal patterns
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On the white candle the price surges — the bulls have the control over the market. Then a small-bodied candle appears — the bulls are loosing conviction. When a strong black body appears it means the bears seize control. The optimal Evening Star signal would have a gap before and after the star day. Though the second gap occurs rarely it doesn’t diminish the significance of the pattern. The main criterion of significance is the magnitude, that the third day comes down into the white candle of the first day.
Sometimes it the pattern may consist of more than one star.
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Figure 2. Example of a reversal pattern
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Signal Enhancements of the « Evening star» pattern:
- A gap after the star day.
- The magnitude, that the third day comes down into the white candle of the first day, indicates the strength of the reversal.
- Small trading volume on the first candle and big volume on the third candle.
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