Pattern Spotted is our format where we analyze patterns and configurations as they appear in the markets. This week we discuss the Evening Star on S&P500 and DAX.
The Evening Star was one of the first configurations that captured my attention when I started studying technical analysis.
chart: Japanese Candelsticks Pattern – Evening Star
The reason is simple: it’s easy to identify.
Three candles, clear rules, no ambiguity. There’s no room for subjective interpretations as with head and shoulders, where the discussion about what constitutes a shoulder can last hours.
With the Evening Star, the pattern’s presence is objective.
Then comes experience. And the numbers arrive.
The Statistical Reality
I applied the pattern to various markets across different timeframes, strictly adhering to trend and formation rules. The result recalibrated initial expectations.
On weekly timeframes, the Evening Star is rare. And when it appears, in most cases it proves inefficient.
chart: Evening Star EUR/USD daily
To provide context: on EUR/USD daily, I identified only one case from 2000 to today. It was 2007, and even that presented borderline elements—the trend was a second peak after a correction. Technically an uptrend, but not in its purest form.
Getting into specifics: the day after the third candle there was a strong bounce on the MA10 (green line) and the following day came the break of C3, concurrent with that of the moving average.
In my view, the definitive signal was given by the break of the moving average, not by the Evening Star.
From a textbook perspective, the pattern exists and paid off, but the question remains: would it have paid off without being accompanied by another technical signal?
My experience suggests the answer is almost always negative. On other assets, the Evening Star repeated more frequently than on EUR/USD, but always with failure rates higher than success rates.
S&P500: When It Fails
chart: Evening Star on S&P500 weekly
In the chart above, the most recent failure on the S&P500 weekly chart (October-November 2023).
Confirmation arrives two weeks after C3, but if we pay attention there’s a touch on the MA20W (orange) and a bounce creating a lower shadow.
The MA20W, as we know from Chart of The Week, is fundamental to the current bull market.
An Evening Star above the MA20W is very likely just noise.
While not being overwhelmed, the Evening Star’s high was exceeded on the weekly close, triggering the stop loss, even though the S&P500 index did not accelerate afterward.
DAX: When It Works
chart: Evening Star on DAX daily
July 2019, an Evening Star on the DAX. The break of C3 occurs in a gap down, followed by a long sideways movement lasting several days with a final spike toward C3.
Certainly not an easy situation to manage. The final acceleration arrives between late July (MA50 break, red line) and early August (pullback right on the MA50).
Following the algorithm faithfully, it’s a success, but looking ex post, it doesn’t really seem the decline was caused by the Evening Star. In this case too, the break of a moving average (the 50) appears to have been the catalyst, as it also confirmed a head and shoulders (which we’ll discuss in one of the upcoming episodes) over the June-July period.
The Pattern Behind the Pattern
There’s an element that emerges from analyzing successful cases.
Almost always, the Evening Star that works is associated with another signal of greater relevance: a double top, the break of a significant moving average, the breach of an important support level, a head and shoulders.
The Evening Star alone is not enough. When it works, it’s rarely exclusively its merit.
Conclusion
The Evening Star as a pattern exists. It’s real, identifiable, objective. But I would never trade it stand alone. Only as confirmation of other signals or more solid configurations. A piece in a mosaic, not the mosaic itself.
When you see an Evening Star, the question isn’t just “is the pattern there?” But also “what else is there?”
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