Evening Star Candlestick Pattern Variations List
Lately, I’ve noticed a number of variations to evening star candlestick patterns popping up in the market that don’t seem to necessarily be picked up by generic stock screeners.
At this point, this list is just acting as a stepping-stone for my future work. In the future, I will be revisiting this list and back-testing pattern variations. I also have the secondary goal of pulling along anyone else interested in following me along on my journey to build a better stock screener :)
Some of the potential “variations” that I have found may just be nothing-burgers! So take this with a grain of salt. I haven’t had the time to back-test these, and this list is a work-in-progress as I (hopefully) will keep adding to it :)
Brief introduction to evening star candlestick patterns
Evening star candlestick patterns are one type of ‘reversal’ indicator listed in Steve Nison’s book on Japanese Candlestick Charting Techniques.
The evening star candlestick can signal a potential reversal from a previous uptrend. The pattern is made up of three candles: after a bullish candle, a star (which could be green or red) occurs on a gap up day, which is followed by a bearish candle that drives the price back within the body of the initial bullish candle:
An example of evening star candlestick patterns in the wild
Here is an example of an evening star candlestick pattern variation marking a key resistance level in AVGO’s stock chart:
I discussed this example in more detail in one of my previous articles:
Popular characteristics of evening candlestick pattern variations
Some of the characteristics that I’ve found to vary in some of the variations to these evening star candlestick patterns are the following:
Variations to the first (extended bullish) candle:
How “extended” (long) does this candle truly need to be?
Variations to the second (gap-up star or doji) candle:
Deviations to the gap… how much of a gap is truly required here?
Deviations to the candle pattern itself… what if it appears larger, appears similar in price level to the first candle, like a harami, etc?
Variations to the third (extended bearish) candle:
In most textbook examples, the third candle opens somewhere within the gap and closes somewhere within the first candle.
What if it engulfs the second candle? Or even the first candle in addition to it?
Does its size matter most relative to the first candle or relative to the rest of the chart?
Finally, Some Examples
Here are some examples in the market that I have found to exhibit some of these characteristics:
NVDA 3/26
AVGO 3/5
ASML 3/5, 3/8
QCOM 2/16, 3/5, 3/13
NVDA Candlestick Chart, 3/26
The three-candle pattern completing on March 26th marked NVDA stock’s second unsuccessful attempt in March to reach new highs for the year:
First of all, if you were watching the stock chart, you’d likely have anticipated resistance around these prices after the extended bearish candle that appeared around these levels earlier in March.
The first candle in this pattern is an extended bullish candle (check).
The second candle in this pattern technically was not a gap-up day. This candle also appears to be similar enough to a shooting star, but the upper shadow isn’t quite twice as long as the candle body. The shadow, however, does echo resistance at higher prices that was already seen earlier in March.
In most evening star candle diagrams, the third candle (extended bearish candle, which is what we have here) opens in the gap between the first and second candles (which is non-existent here). In this pattern, this extended bearish candle actually opens above the close of the second candle, and closes under it. So here, the third candle actually engulfs the second candle in the pattern, and closes around the mid-point of the first candle in the pattern (similar to the typical pattern).
AVGO Candlestick Chart, 3/5
The three-candle pattern concluding on 3/5 marked a key resistance level in the stock’s price, which continued to put pressure on the stock for months:
There are a few characteristics of this pattern that lead me to call it a “variation.”
The second candle in the pattern does not appear on a gap-up day.
The third candle in the pattern, while opening close to the close of the first and second candles, actually opens below the closing price of the first candle in the pattern.
Because of these criteria, I don’t think this would have been classified as an evening star candlestick pattern by a generic stock screener.
ASML Candlestick Chart, 3/5 and 3/8
There are two sets of three-candle patterns occurring in ASML’s candlestick chart, marking price highs in March, that appear quite similar to evening star candlestick patterns:
In the first set of candles, you’ll see that the second candle does not occur on a gap-up day, and the third candle actually opens below the close of the first candle. This is similar to the AVGO example above.
The stock still continued to rise after this first set of candles, however.
The second set of candles marked the true extent of the stock’s rise over this period, as the stock price started a continual decline after the conclusion of this second set of candles.
In the second set of candles, the first candle isn’t as “extended” as most of the other “extended” bullish candles on the chart appear to be. So, the first candle is smaller than what I would have expected. The second candle, while occurring on a gap-up day, is actually more “extended” than the first! The third candle opens within the body of the second candle, engulfs the gap, and closes within the body of the first candle.
QCOM Candlestick Chart, 2/16, 3/5, 3/13
There are a number of examples on QCOM’s candlestick chart that appear like evening star candles:
While other examples on my list marked major-ish resistance areas for a stock, these didn’t really.
In the first and the third example on this chart, you can argue that the first candle isn’t exactly an “extended” bullish candle. While the body doesn’t particularly appear to be that small compared to the rest of the chart, it doesn’t appear to be that large either.
You’ll see the gap-up day in the first and second examples on the chart, but not on the third.
The second candles in these examples all appear to be either stars or dojis.
The third candle has the most variance in these examples.
In the first example, the third candle engulfs the second candle and the gap, and closes within the body of the first candle.
In the second example, the third candle opens in the gap and closes within the body of the first candle. I would say that the second candle appears the closest to the textbook example of an evening doji star candle.
In the third example, the third candle opens just slightly higher than the first candle, almost engulfing the first candle in the pattern. The first and third candle in this third example on the chart also do not appear to be “extended” (long) candles.
In Conclusion…
Like I said above, the purpose of this article is simply for me to collect evening candlestick pattern variation examples. In the future I will be back-testing these variations and improving my stock screener, so stay tuned!
Thanks for reading, and happy trading!
