Definition - Signalling a top reversal, this pattern is made up of three candlesticks in total. Firstly, a white candlestick will appear on the first day before being followed by a Doji which forms a star gapping up. On the third day, a black candlestick will be observed which closes inside the white body of the first day suggesting a meaningful top pattern.
- On the first day, a white candlestick will form in a market that has been experiencing a prevailing uptrend.
- On day two, a Doji will be shown which should gap upwards in the direction of the trend.
- Finally, a black candlestick will complete the pattern.
Patterns and Flexibility
Starting with a white candlestick, the Bearish Evening Doji Star is then followed by a Doji that opens higher than the previous close and therefore gaps up. With a similar opening price as the Doji, the third black candlestick will close inside the white candlestick that formed at the very beginning. According to the candlesticks at the beginning of the pattern, this will decide the extent of how low the candlestick has to close. With the third day’s close, it must find the midpoint between the opening of the first day and the highest body level of the second day.
Behaviour of Trader
When the first candlestick is seen, it signals that the uptrend will continue. As the Doji appears with a gap, this gives further indication that the bulls are attempting to push the price even higher. However, this soon changes and indecision is suggested by the little price change throughout the day. On day three, prices fall right from the start of the day and the bears then take control.
Sell/Stop Loss Levels
For there to be confirmation, the prices must cross below the level of confirmation which, for this pattern, is the last close. Additionally, the stop loss level is considered to be the higher of the previous two highs. If the prices rise following the bearish signal, the stop loss will be triggered if two days of highs are observed above the stop loss level and no bullish pattern is detected.