Evaluating Profitability of Shooting Star Candlestick Pattern in Indian Stock Market

Abstract

This paper investigates the profitability of a candlestick reversal pattern ‘Shooting Star’ in Indian stock market. Its profitability is investigated by using daily data of Nifty 50 component stocks over the period from January 1, 2000 till December 31, 2017. Seven different trading strategies based on shooting star are tested using bootstrapped skewness adjusted t-test and binomial test. The superior performance of three trading strategies for one- and two-day holding periods demonstrates that it can be used to generate profits in Indian stock market. It is recommended that one should trade shooting stars of significantly smaller size and exit short positions within two days.