capital goods stock: Chart Check: 30% in a month! This capital goods stock just gave a breakout from double bottom pattern
The stock price rallied from Rs 859 recorded on July 12 to Rs 1,119 on 12 August which translates into an upside of over 30 per cent in a month.
The sharp price action helped the stock to break out from the resistance line of the double bottom pattern on the weekly charts which signals strength.
The neckline of the double bottom pattern was placed below Rs 1,100 levels. The stock closed with gains of nearly 9 per cent in a week.
Double bottom is formed at the bottom and indicates the end of a falling market. The pattern is formed by two clear bottoms separated by a top.
The confirmation occurs when the price goes above the confirmation line.
Short-term traders can look to buy the stock now or on dips for a possible target of Rs 1,500 in the next 1-2 months, suggest experts.
The relative strength index (RSI) is at 75.3. RSI above 70 is considered overbought. This implies that the stock may show a pullback. MACD is above its center and signal line, this is a bullish indicator.
On the price front, the stock is trading above all the crucial short and long-term moving averages such as 5,10,20,30,50,100 and 200-DMA which is a positive sign for the bulls.
On the weekly timeframe prices were in a strong uptrend from May 2020, Post September 2021 prices witnessed a pause in the trend. Prices are currently trading at its all-time high level which indicates that prices are in a strong momentum.
“Last week prices have given a breakout from a double bottom pattern, which indicates that prices have begun a new trend on the upside,” Vidnyan Sawant, AVP – Technical Research, GEPL Capital, said.
On the daily charts, we can observe that the volumes are increasing with the Prices which confirms that the demand is pushing the price higher.
Bollinger Band on the daily timeframe has started to expand which tells that the volatility in the prices are rising for an upside move.
“RSI on the weekly timeframe has given a breakout which again tells that prices have strong momentum in it. Going ahead we expect the prices to go higher till the level of Rs 1,500, we recommend a stop loss of Rs 1,000, strictly on the closing basis,” he said.
“The confirmation occurs when the price goes above the top (i.e. the confirmation line). Most rules associated with the double top formation are also applicable to double bottom pattern,” recommends Sawant.
(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times.)