Thomas Bulkowski’s successful investment activities allowed him to retire at age 36. He is an internationally known author and trader with 30 years of stock market experience and widely regarded as a leading expert on chart patterns. His books, including the best selling Encyclopedia of Chart Patterns, have been translated into many languages. He may be reached at

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Bulkowski's Evening Doji Star

Market

Industrials (^DJI):

Transports (^DJT):

Utilities (^DJU):

Nasdaq (^IXIC):

S&P 500 (^GSPC):

As of 05/17/2013

15,354 121.18 0.8%

6,549 81.47 1.3%

517 4.83 0.9%

3,499 33.73 1.0%

1,667 17.00 1.0%

YTD

17.2%

23.4%

14.0%

15.9%

16.9%

Tom's Targets Overview: 05/14/2013

15,500 or 14,850 by 06/01/2013

6,750 or 6,200 by 06/01/2013

525 or 500 by 06/01/2013

3,600 or 3,300 by 06/01/2013

1,700 or 1,600 by 06/01/2013

Test Portfolios and CPI

Indus. strength: -0.8%

Mutt Losers: 6.6%

Mutt Winners: 1.9%

Wilder RSI: 22.7%

CPI:

on 04/19/2013

In my book, Encyclopedia of Candlestick Charts, pictured on the right, I explore the entire range of candlestick patterns from abandoned babies to windows (not exactly A to Z, but you get the idea), in both bull and bear markets, using almost 5 million candle lines in the tests.

The book takes an in-depth look at 103 candlestick patterns and reports on behavior and rank (3 types: reversal rate, frequency, and overall performance), identification guidelines, performance statistics (tables of general statistics, height, and volume), trading tactics (tables of statistics on reversal rates and performance indicators), and wraps each chapter with a sample trade. I share a sliver of that information below. If you like what you read here, then you will love the book. Help support this website and buy a copy by clicking on the above link.

The evening doji star is one of the better performing candlestick patterns. It has a high reversal rate, ranking 12th, and the performance over time is respectable, too, but not outstanding. A check of the numbers shows that downward breakouts are weakest, and upward ones are strongest with the bear market/up breakout configuration doing the best of the bunch. The trouble with this pattern is its rarity, ranking 81st out of 103 candles where 1 is voted most popular. Few samples are probably why this candlestick does so well.

Let's take a closer look at this candle pattern.

Important Results

Discussion

Identification Guidelines

Three Trading Tidbits

Example

Evening Doji Star Important Results

Theoretical performance: Bearish reversal

Tested performance: Bearish reversal 71% of the time

Frequency rank: 81

Overall performance rank: 30

Best percentage meeting price target: 57% (bear market, up breakout)

Best average move in 10 days: 6.20% (bear market, up breakout)

Best 10-day performance rank: 15 (bull market, up breakout)

All ranks are out of 103 candlestick patterns with the top performer ranking 1. "Best" means the highest rated of the four combinations of bull/bear market, up/down breakouts.

The above numbers are based on hundreds of perfect trades. See the glossary for definitions.

Evening Doji Star

Evening Doji Star Discussion

Candle theory says that the evening doji star pattern should act as a bearish reversal of the upward price trend, and testing reveals that it does 71% of the time. That gives the candle a rank of 12th, which is quite high. However, with a frequency rank of 81st, you might not find this candle. The overall performance rank is 30th, so it could be a better performer over time, but actually does quite well -- thank you very much.

The best average move 10 days after the breakout is a rise of 6.2%, but just 28 patterns account for the percentage. Thus, the results are likely to change. The best performance rank over 10 days comes after an upward breakout in a bull market. The rank is 15th, which is quite high, and 199 samples are used, so the rank is realistic, too.

Evening Doji Star Identification Guidelines

Characteristic	Discussion
Number of candle lines	Three.
Price trend leading to the pattern	Upward.
Configuration	Look for a tall white candle in an upward price trend followed by a doji whose body gaps above the two surrounding days. Ignore the shadows. The last day is a tall black candle that closes at or below the mid point of the first day.

Three Trading Tidbits for Evening Doji Star

If you want a few bones from my Encyclopedia of candlestick charts book, here are three to chew on. The pages refer to the book where the tips appear.

Evening doji star candles with upward breakouts perform well -- page 329.
Select tall candles for the best performance -- page 320-330.
Evening doji stars within a third of the yearly low tend to act as reversals most often -- page 332.

Evening Doji Star Example

The evening doji star candlestick on the daily scale

The evening doji star appears circled in red on the daily scale. Price moves up to a tall white candle. The next day, a doji forms whose body floats above the bodies of the surrounding two candles. The next day, a black candle takes price below the mid point of the body of the first candle in the pattern, completing the evening doji star.

This evening doji star acts as a bearish reversal of the upward price trend because price rises into the pattern and breaks out downward. A downward breakout occurs when price closes below the bottom of the candlestick pattern.

Since price in the last candle is already near the low, a downward breakout is expected -- not guaranteed, just expected. A check of the numbers shows that it breaks out downward 71% of the time.

-- Thomas Bulkowski