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Article / 28 September 2016 at 12:32 GMT

Evening Star in EURGBP may have signalled a top

Technical Analyst / FuturesTechs
United Kingdom
By Clive Lambert

One of the most powerful candlestick patterns is the Evening Star. What makes an Evening Star? Below is an excerpt from my book:

Evening Star properties:

BEARISH REVERSAL

1. Three Candle pattern
2. The market is in an uptrend
3. The first candle has a green real body, in line with the Bull trend
4. The second candle’s real body gaps away from the first candle’s real body
5. The second candle has a small real body
6. The colour of the second candle’s real body is not important
7. The third candle is red and closes well into the real body of the first’s candle.

So we didn't quite satisfy rule number 4 as there was no gap higher on Monday, but you rarely get gaps on Forex charts as they're 24 hour markets! Yesterday's weakness ticked off rule number 7 as we closed below the Marabuzo line (my proxy) of last Thursday's green candle; the first candle of the three (8,619 the level in question).

Today we've seen a recovery that's failed at 8,642, which is the Marabuzo line of yesterday's large red candle. If we now close below channel support at 8,609 we will get further confirmation that this is indeed a top. We can then look for a move back to 8,295-8,334.

Chart: EURGBP Evening Star; a powerful reversal, especially as it's at resistance
Evening Star in EURGBP
Source: CQG 

– Edited by Clare MacCarthy
Clive Lambert is chief technical analyst at FuturesTechs

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