Morning star is a Three Candlestick pattern which indicates the reversal in trend. It is a Bullish reversal pattern which is appeared in the bottom of a down-trend. The Morning star pattern is witnessed in “TATA STEEL” on 30-Jan-2019.
The Conditions and Qualification of Morning star pattern:
1) The Prior trend should be Bearish. – Yes. it is witnessed from the chart.
2) The body of the first candle is Red, and it is followed by an In-decisive pattern (Star) on the second day. – Yes. these are witnessed from the chart.
3) The third day’s candle should be in Green color.
4) The Gap before and after the star day (Second day) improves the reliability of the pattern. – It is evident from the chart that the second day (Star) opened gap down and the third day witnessed Gap up.
5) The third day’s candle should cross the minimum of half the way up of the first day’s candle. – Yes. this is also qualified.
The Trading plan: LONG
Entry Price: Rs.471.4 (Above the High of the third day)
Stoploss: Rs.441.35 (Lowest low of the three days)
Target price: Rs. 501.5 (Considering Risk to Reward of 1:1 ratio)
Result of the Trade: Target achieved in 16 days.
Hi,
It seems you have missed out the volume part. Heavy volume can serve to reinforce the validity of the reversal.
Dear Naresh,
Your point is noted. I will correct it. Thanks for your inputs.