Evening Star Doji Candlestick Pattern

The Evening Star Doji is a variation of the Evening Star pattern, with a Doji as the second candle. This makes the pattern even more significant because the Doji represents extreme market indecision, indicating that the trend might be ready to reverse with greater certainty. It signals a potential shift from Bullish to bearish momentum, especially when it appears at the top of an uptrend.

Structure of the Evening Star Doji Pattern:

1. First Candle (Bullish)

• A long green (Bullish) candle, representing the continuation of the uptrend. This candle shows strong buying pressure and confidence in the market.

2. Second Candle (Doji)

• A Doji candle (a small body with long shadows) that forms after the first Bullish candle. The Doji indicates market indecision, where neither buyers nor sellers dominate, and the momentum seems to be slowing. The Doji typically gaps up from the first candle.

3. Third Candle (Bearish)

• A long red (bearish) candle that closes below the midpoint of the first candle. This confirms that sellers have overtaken the market, signapng the potential start of a downtrend.

Key Characteristics:

✅ The first candle is Bullish (green), continuing the uptrend.

✅ The second candle is a Doji, indicating indecision and signapng a potential reversal.

✅ The third candle is bearish (red), closing below the midpoint of the first candle, confirming the trend reversal.

✅ Occurs at the top of an uptrend, signapng a potential bearish reversal.

✅ The Doji in the second candle adds extra weight to the reversal signal because it shows that buying momentum has stalled.

Psychology Behind the Pattern:

• The first Bullish candle shows that buyers are in control and the uptrend is continuing.

• The Doji suggests that the market is now in indecision, and neither buyers nor sellers are gaining the upper hand. It reflects a loss of buying momentum.

• The third bearish candle signals that sellers have regained control, with a strong down move following the indecision, confirming the reversal from Bullish to bearish.

Trading Strategy:

📌 Entry: After the third bearish candle closes below the midpoint of the first candle, confirming the reversal.

📌 Stop-loss: Above the high of the second candle (Doji) or the first candle.

📌 Target: Next support level or based on a risk-reward ratio (e.g., 2:1).

Conclusion:

The Evening Star Doji is a strong bearish reversal signal, especially when combined with volume confirmation and appears at key resistance levels. The inclusion of the Doji in the pattern adds extra weight to the potential for a market shift.