How to Make Money Trading with Candlestick Charts

Evening Star signal
The Japanese named it so because like the

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planet Venus, which is also known as the
evening star, it foretells of gloomy things to
come (night). In the case of the markets, it
means that the prices will be heading lower
from that point.

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Criteria
In order for an Evening Star signal to be
valid, the following conditions must exist:
The price must have been in a definite up
trend before this signal occurs.
The first day of the signal must be a long
white body. The second day must be a
day of indecision. The third day should
be a long dark candle reaching down at
least half way into the body of the first
day’s white candle.
Figure 9.9
shows a few of these variations of
the Evening Star signal.

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Figure 9.9:
Evening Star signal variations
Why the Reversal Works
After an up trend, the novice investors finally
start piling into the stock. This creates the
exuberant white candle at the top. The next
day, the demand is consistently met with
supply from the smart money. The indecision
day is followed by a large down day,
indicating the bears finally taking control

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from the bulls. As in the case of the
abandoned baby Morning Star signal, seeing
a gap between the first and second day and
also a gap between the second and third day
shows a massive change in investor
psychology. Traders should immediately
cash out their positions, or go short.
The following circumstances will further
enhance the probability of reversal shown by
the Evening Star signal:
The first day’s white candle body is very
long compared to the rest of the trading
range, indicating exuberant buying.
There is a spike in volume on the
indecision day.

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Stochastics are in overbought condition.
The second day forms one of the one-day
candlestick reversal signals. 
Figure 9.10
shows an Evening Star formation in
Hindustan Lever.
Figure 9.10: