OMG!!! Is this a real Head & Shoulder?
BPCL - namely: Bharat Petroleum is a big player in petroleum sector in India. The company's stock is too good for both investors and traders.
In recent years, the famous bull run of 2012-2014 has done same with this stock too.The rally began in the month of September, 2013 when the price closed at 331.25, above the last month's high 273 on monthly candle. The volume was also decisive. The bull run begun which never take a breath and continue till the month of August 2015 after hitting high of 987 in previous month. The candle of August 2015 stopped the rally and from the next month it entered in sideways. Current month candle has given significant downmove and it seems the stock has still some room towards bottom. This was the story of monthly charts.
For daily chart, the story is like this. The Price continues till July 2015, and the pick was recorded on 23 July at 987 Rs. It gradually came down and recorded the low of 802.9 on 24th August, 2015. The stock price started rising very next day. The short term bull might feel great about the price going high from this point with the assumption of prices will go higher and higher and there will be no force to stop this rally.
But, the long term bears were smiling because on 24th August, the fate was written. Because, it formed the second neck point for the most favourite bear cake - Head & Shoulder. The first neck was already formed on 17 June, 2015 at 803. This also might had given feeling that 803-802 is a support level for this counter. And it proved true to for pretty long period which lasted for almost six months, until it was broken on 12 February, 2016.
The strange part for me as an analyst arise here ony. The Head and Shoulder was formed in the month ranging from May 2015 to August 2015. The second neck point was formed in the month of August, 2015. Now, after a pretty long time period of six month, the neck point has been broken on the charts and theoritically the pattern - Head & Shoulder has been completed. Whether this bearish brekout will sustain, depends on the neckline whether broken again on upside or not.
The question pinging me is that, whether this long secon shoulder is technically considerable or not? I have never seen such a larger shoulder ever on any other charts. This is something unique. If anybody have any thing to say in this regards, please post your reply here. I will be more than happy to listen.
Now, what to do for trading in this stock? I saw this stock because a friend of mine asked yesterday that he has got advise from Indian and Foreign advisory houses about investing in this stock along with other 2 petroleum giants - IOC and Hindpetro. The target for BPCL is 1000 in 1 year. I have seen the charts of all these 3 companies and they move in similar pattern, more or less, to each other. Means bearish pattern for one is bearish pattern for all. But still, the question is there. Whether to invest in these stock or not?
Do I need to say anything after the discussion of BPCL chart? According to me, there is still plenty of room on downward side, and if we consider this neckline break as completion of Bearish Head & Shoulder, the target for BPCL in near future is about 600 to 650. This may not be true if the charts shows any significant reversal. Which is not seen on the charts yet. The Stop Loss point for selling this counter can be the neckline which has become a resistance for the stock price.
Till then, Enjoy selling on every top.
Happy Trading...Trend is Friend...
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- Anand Singh Gaur
- Sunil Kothari