The evening star pattern develops in three candles, while the head and shoulders may take more candles to develop. Actually, it’s impossible for the head and shoulders pattern to develop in fewer than five candles. The head and shoulders pattern actually forms three smaller tops within the larger pattern, and therefore needs more candles to complete the pattern.
On the other hand, the evening star pattern will take the shape of one rounded top.
As a result, it’s possible for the evening star to be a portion of the head and shoulders pattern, but the head and shoulders pattern cannot be a part of the evening star.
The Similarity
- Both patterns are reversal patterns, meaning they indicate that a trend is about to change.
- Both patterns are made up of three candles.
- Both patterns require the first candle to be bullish and the third candle to be bearish.
- Both patterns can be used to trade stocks, currencies, and other financial instruments.
The Differences
- The Evening Star pattern is a shorter-term pattern that typically forms over a period of three days, while the Head and Shoulders pattern is a longer-term pattern that typically forms over a period of several weeks or months.
- The Evening Star pattern is formed by a large bullish candle, a small-bodied candle, and a large bearish candle, while
the Head and Shoulders pattern is formed by three consecutive peaks, with the middle peak being the highest. - The Evening Star pattern is considered to be a more reliable indicator of a trend reversal than the Head and Shoulders pattern.
The Correctness and Reliability
Both the Evening Star pattern and the Head and Shoulders pattern are technical analysis tools that can be used to identify potential trend reversals. However, no technical analysis tool is 100% accurate, and both patterns can be false signals. It is important to use other technical analysis tools and to consider fundamental factors when making trading decisions.
For the Effective Use Case
Look for the patterns to form in the context of a broader trend. The Evening Star pattern is more likely to be a reliable signal if it forms in an uptrend, while the Head and Shoulders pattern is more likely to be a reliable signal if it forms in a downtrend.
Use other technical analysis tools to confirm the signal. For example, you can look for confirmation from moving averages, relative strength index (RSI), or other indicators.
Consider fundamental factors. Technical analysis can help you identify potential trend reversals, but it is important to also consider fundamental factors such as economic data, company earnings, and news events when making trading decisions.
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