Evening Star Predicts Bear Markets

A Japanese candlestick signal called the Evening Star predicts bear markets. Forex currency rates vary with events in both nations whose currencies one trades. And market sentiment fluctuates according to the fundamentals and the current psychology of the market. When one currency has been rising against another traders may believe that the trend is about to end. However, getting out of a trade too soon can result in lost profits and waiting too long can result losses as the currency reverses course. A price pattern that was recognized by rice traders in ancient Japan helps in this case. The Evening Star predicts bear markets of Forex currency rates with timely accuracy.

Candlesticks and the Evening Star

Candlesticks

What is the Evening Star and, for that matter, what are Japanese candlesticks? Candlesticks are rectangles superimposed on a stock, commodity, or Forex chart. The top and bottom of the rectangle are located at the opening and closing prices of the day. A white candle tells us that that currency closed higher than it opened and a black candle tells us that it was a losing day overall. The candle has a wick at each end, called a shadow. The shadows tell us how high and how low trading ranged before the day ended. A specific type of candle or two or three can be a candlestick signal. Candlestick signals are what Forex traders look for in trying to predict changes in market sentiment and consequent price movement. While the Evening Start predicts bear markets it is possible to anticipate a Forex market reversal with the Doji signal in either direction.

Evening Star Signal

This signal indicates that a falling market is at hand. It is a three candlestick signal which typically means that it comprises the results of three days of trading. The evening star in many world cultures is the planet Venus which lies low in the sky at sundown half of the year. At these times it obviously predicts a long night. By analogy in Forex the Evening Star predicts a bear market. The first candle in the signal is white and is the last up day of established bull market. The second candle is quite short and lies above the top of the first on the Forex chart. It is black. The third candle is black and starts below the level of the second and extends into to range of the lower half of the first candle. As the Evening Star predicts bear markets traders can expect to see the currency continue to fall.

What Is Happening when We See an Evening Star Signal?

The first white candle is just another good day for the currency being traded. It goes up a healthy amount which is consistent with the fact that the trend is up. The second candle makes us aware that there are changes afoot. Although the currency gaps up at the start of the day it ends a bit lower. This tells us that there is uncertainty in the market. Although this could just be a short correction it is not. The next day often gaps down and the traded currency falls substantially nearly taking away nearly all of the gains of the first day. Fundamentals may have changed or the currency may simply have become overbought. In either case the Evening Star predicts bear markets and traders who pay attention can trade accordingly and make profits. The mirror image of the Evening Star signal, the Morning Star in Forex trading helps predict a bull market.