CadilaHC Inverted Head & Shoulder
CadilaHC - One of the leading pharma company of India. The company has attractvie record as far as stock price is concern. The company has attractive record regarding profits and dividends also. It has been a investors paradise too.
The stock was moving in a range for a long time between March 2010 to February 2014 when it crosses previous high of 197 giving clear breakout on monthly candle of February, 2014 and ultimately closed at 206.7. The stock retraced upto 174 in next three months after the breakout, but never breaches the open of February - 162.4 Rs. and in the month of June 2014, it started stiff upmove, which lasts till October 2015. In the month of October, 2015 it formed a spinning top candle on monthly charts. It was the end of continuous uptrend of more than 20 months. The one who had invested on the breakout may have more than doubled the money in this period as the high recorded was 453.3. More than 100% returns in 20 months. Wonderful returns.
The story begins here. In October 2015, the stock shows a bit of bearish mood. Let us come to the daily chart now. The stock hit the high of 453.3 on 23rd October 2015. it was a bearish candle on the top. It started downmove from there. It came down to form a Head & Shoulder and the breakout of H&S was recorded on 4 December 2015 with the daily close of 393.2. The stock show strong downmove after few days consolidation near the neckline of H&S. The famous one day fall of 55 Rs (15%) in a single day was also recorded just after few days of neckline breakout. The day was 31st December 2015. The low recorded was of 295 on 21st January 2016.
The Stock shows a bit of upmove and a bit of downmove after the great fall of 31st December 2015. The first high of 326.9 on 13th January 2016 and other on 8th February 2016 at 333.8. Higher high started forming on the daily charts. Another signal of uptrend - higher lows were also seen on the charts. 295 and 304 on 21st January and 12th February 2016 respectively.
But this is not the our point of discussion. We are discussing a inverted Head & Shoulder - a bullish chart pattern. Let us see how it has been formed on the charts.
The two tops of 13th January and 12th February has formed two neckpoints of inverted H&S on the charts. Means, the first shoulder being formed before 13th January 2016 and the head was formed between 13th January and 8th February 2016. The high of 8th February formed second neckpoint which was going to be helpful to measure the formation and completion of second shoulder. The second shoulder was formed on 8th February and tested on various occassion when the price line touched or tends to be near to the extended neckline from below on the daily charts, but never succeeded to break it on upward direction till yesterday.
Yesterday, 10th March, 2016 was the day when the charts recorded a clear breakout above this neckline. The close of yeaterday was 344.3. The stock opened at 336, went low upto 331.55 and after hitting high of 346, it gave close at 344.3. The candle formed is clearly breaking the neckline drawn extending the tops of 13th January and 8th February. The Inverted Head & Shoulder is confirmed and the breakout occured. Now, let us the the future probable move of the stock.
After this neckine breakout, the stock may give good uptrend in near of long terms. The investors has a chance to ride the stock for medium to long term peroid. The breaking of prevoius high of 453.3 may become possible too though - "Dilli abhi dur hai", the opportunity has been generated.
For short term traders also the stock has given indication of trading on bull side in this stock. If Nifty becomes positive, then the stock will definitely shows upmove provided it remains above the neckline in next few trading sessions and not show the reversal on down side from here. The traders can long the counter with the stop loss of this neckline shown on the daily charts. For intraday traders, god knows the movement...
Happy Trading...Trend is Friend...
- Anand Singh Gaur
- Sunil Kothari