BEARISH EVENING DOJI STAR
Definition
This is a three-candlestick pattern indicating a major top reversal. It consists of a white candlestick followed by a Doji, which typically gaps up to form a Doji Star. The third candlestick is black and closes well within the real body of the bullish candlestick from the first session. This is a notable reversal pattern.
Recognition Criteria
1. The market is currently defined by a dominant upward trend.
2. We see a white candlestick on the first day.
3. Then, we see a Doji on the second day that gaps in the direction of the uptrend.
4. A black candlestick is observed on the third day.
Pattern Requirements and Flexibility
The Bearish Evening Doji Star pattern begins with a white candlestick, followed by a Doji with a gap opening higher than the first day’s close. On the third day, a black candlestick appears, opening at or below the Doji’s opening price and closing well within the real body of the bullish candlestick from the first session. The degree, to which the third candlestick must close lower, is determined by the other candlesticks in the pattern. The third day’s closing should reach the midpoint between the first day’s opening and the second day’s highest body level.
Trader’s Behavior
An uptrend is evident, with the white candlestick confirming its continuation. The presence of the Doji, accompanied by a gap, indicates that the bulls are still driving the price higher. However, the tight price action between the open and close suggests indecision. On the third day, prices open with a gap lower and close significantly lower. This indicates that the bears have seized control of the market.
Sell/Stop-Loss Levels
The confirmation level is determined by the last close. For confirmation, prices should fall below this level.
The stop-loss level is defined as the higher of the last two highs. Following the bearish signal, if prices rise instead of falling and either close above or make two consecutive daily highs above the stop-loss level, without detecting any bullish pattern, the stop-loss is triggered.