Bajaj Finance A Classic case of failure of Head & Shoulder at top...
Bajaj Finance - A Lease and Hire Purchase sector giant, headed by Mr Rahul Bajaj, is in uptrend since quite some time. We observed its movements very carefully throughout the bull run.
We observed formation of a Head and Shoulder at the top of the rally on daily charts. The time period was between April,2015 to September, 2015. It's pretty long time period of 6 months. The two neck points created on the dates: 28th May, 2015 and 24th August, 2015 respectively. We draw a neckline connecting the low values of both these days candles.
The neckline extended till date, but it has not been broken significantly. The trend line has been tested couple of time during this time period. First incidence was occurred on 22 September, 2015, when the candle close came well below the neckline and that is also with considerable volumes. But, the very next day, a hammer was formed on the daily charts closing(4844.90) above the previous day's low(4783.50 and even close(4821.4). The neckline was broken from below and the major breakdown occur on 29th September, 2015 closing above neckline(5110.95) hitting high of 5149.
The price remains above the upward slanting neckline The neckline again broken on 9th October, 2015 closing below the neckline at 4996.35. The price remain below the neckline till 20th October, when price again break the neckline with significant size of 6.4% candle body and extra ordinary volumes recorded for the day.
After this, except minor incidences, the prices tends to remain above the neckline. The stock gave excellent movement in upward direction. The high achieved was on 11th January, 2016 at 6389. Same day a doji candle was formed on the charts.
Next day, an important event occurred on the chart. The counter opened at 6310 just above the previous days close of 6306.2 After hitting high of 6389, it came down and close at 6208.8 after hitting low of 6152. This creates an evening star on the daily charts of Bajaj Finance. Evening Star is again a strong bearish candle. The proof received with today's red candle. The low recorded today is at 6035 and closed at 6077.85. Total down move of 4.87% from the high of 6389.
Now, we are observing the stock whether coming down to the neckline current value - that is at around 5700 to 6000. Traders are advised to trade accordingly.
If the stock came down to the neckline and if the neckline broken, then only it will go down. Else the stock will remain in uptrend. And if the uptrend will continue if the market remains bullish.
Happy Trading...Trend is Friend...
- Anand Singh Gaur
- Sunil Kothari