Is Evening Star candle stick pattern accurate in Hong Kong Stock Investment ?Is candle stick pattern Evening Star accurate in Hong Kong Stock Investment ?

Evening star is similar to morning star composed of 3 candle sticks. There should be a upward trend before the pattern happens. When the first long white candle exists, a short bodied candle whose body gaps above the first candle appears in the following day. The third candle is long and black. It gaps below the body of the second candle and closes at least 50% into the body of the first candle. If the second candle is a doji whose open and close are very close, the pattern is called Evening Doji Star.

In order to examine the performance of Evening Star in Hong Kong stock investment, I use the following settings in the simulation :

• 1319 daily stock data from 1/1/2000 to 31/5/2013 downloaded from Yahoo
• Short at the open price of tomorrow once the pattern is found. Stop and take profit immediately at the stop loss and target price.
• An 500K initial capital divided into 5 equal portions. If there is a profit, the equity increases and the investment capital of each portion is proportionally increased. If there is a loss, vice versa. The maximum number of stock symbols held is 5.
• 100 sets of stop losses and target prices, basically stop loss from 1% to 10% in a step of 2%, the target price from 2% to 20% in a step of 2%.
• 0.375% commission and stamp fee for each transaction, i.e. 0.75% for a buy and a sell transaction.
• The lowest price in the past 50 trading days must be at least 30 % lower than the highest price of the Evening Star chart stick pattern

	Annual Return	Max Drawdown	Number of Trades	Success Rate	Best combination of Stop Loss and Target Price
Evening Star	0.8%	-14.9%	190	36.3%	4% stop loss, 10% target price
Evening Doji Star	1.2%	-7.4%	59	42.4%	4% stop loss, 10% target price

Conclusion :
Evening Star and Evening Doji Star perform badly in Hong Kong Stock investment even with different combinations of stop loss and target price. They are not recommended.