Time To Buy Home Depot – There’s a Bullish Reversal Pattern On The Daily Chart

By | March 5, 2018

The decline in Home Depot (HD) shares this month has been dramatic, but the sell-off may have reached an inflection point. The $175 level has been tested three times this month, the last being the central candle in a morningstar bullish reversal pattern.

A morningstar pattern is a three-period formation that consists of a large up-day candle, followed by a narrow opening and closing range “doji” candle, and completed by a large down-day candle. It reflects a transition from bearishness to bullishness.

The $175 level is of particular technical importance because it is also the 50% retracement level of last year’s important July low and this year’s high. Monday’s close was also near the high of the session and just below the 38% retracement level.

Confirmation of the pattern requires an upper candle close above the upper $182.50 retracement level. Ultimately a move back above the 50 day moving average would confirm a return to the previous uptrend.

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