granules india share price: Chart Check: A breakout from inverse head & shoulder pattern could push this pharma stock to fresh highs
Short-term traders who missed the rally seen in the last three months can look to buy the stock now for a target of Rs 440, suggest experts.
An inverse head & shoulder pattern is the mirror image of the head and shoulder pattern and is a bullish signal.
It is defined as three bottoms with the middle bottom (head – marked as H) significantly lower than the other two bottoms (left and right shoulders – marked as S).
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The pharma stock which started its downward journey from Rs 400-levels recorded in August 2021 bounced back after hitting a low of Rs 227 on 20 June 2022.
The stock saw a vertical move to Rs 330 in August and post that it started consolidating. The recent price action helped the stock to break out of the consolidation range on daily charts since August and from an inverse head and shoulder pattern on the weekly charts.
The price action also suggests that momentum has started building in the counter. It rose nearly 7 per cent in a week, and nearly 13 per cent in a month.
The stock closed with gains of over 6 per cent on Friday at Rs 345. However, it is still down nearly 5 per cent from its January high of Rs 362.
The stock is trading above its short- and long-term moving averages of 5,10,30,50,100 and 200-DMA which is a positive sign for the bulls.
The relative strength index (RSI) is at 67.9. RSI below 30 is considered oversold and above 70 is considered overbought, Trendlyne data showed. MACD is above its center and signal Line, this is a bullish indicator.
“On the weekly timeframe of Granules, we can spot that the prices have broken the prior swing high of Rs 323.95 (March 2022) negating lower low, lower high,” Vidnyan Sawant, AVP – Technical Research, GEPL Capital, said.
The stock has given a breakout from the inverse head and shoulder pattern indicating the beginning of a trend on the upside.
“The stock has breached all its volume congestion zone, which confirms the breakout. Prices have sustained above the upper bollinger band indicating rise in volatility for up move,” he said.
The RSI on the daily timeframe is hovering continuously between 70 and 45 mark without attempting to enter the oversold level, reflecting strong momentum built up in the stock.
“Going ahead, we expect prices to rise higher till Rs 440 level where stop loss must be Rs 308 on the closing basis,” recommends Sawant.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
