Stock Rallies 5% from this Low-Risk Double Bottom Pattern!
The Indian markets opened the session with a noticeable gap up on Tuesday. The benchmark index surged 1.31% to 17,852 by 10:06 AM IST with all sectoral indices trading in the green zone. Even the IT pack is raking up good gains in today’s session after plunging hard in the last few days.
A mid-cap IT stock that has come on my radar amid today’s roaring markets is Coforge (NS:). The company has a market capitalization of INR 19,721 crores and is engaged in providing computer programming consultancy and related activities. The stock had taken a heavy beating in the last few days, all thanks to the consistent hammering of the IT space.
However, today there has been an interesting development that is taking place, which is making this stock a very low risk-to-reward opportunity. Amid the past few day’s fall, the stock tanked to a level of around ~INR 3,200 which is almost the same level from where the stock had taken support in June 2022, when it bottomed out. After this low, the stock rallied to over INR 4,000, hence this support zone seems to be of high importance.
Image Description: Daily chart of Coforge showing formation of a double bottom pattern
Image Source: Investing.com
Now, today’s support again at these lows has further confirmed the intense buying pressure which is outstripping supply as investors are finding these levels quite lucrative. The combined price action from mid-June 2022 till today has translated into the formation of a double bottom chart pattern on the daily chart.
This is a reversal pattern and is often known to reverse a prior downtrend. The beauty of this pattern is the extremely low risk-to-reward ratio it provides. If gone wrong, the exit levels are very near, if the reversal happens the rewards could be significant.
However, the double bottom pattern is yet to give a confirmation which is a rally above the highest peak between the two troughs of the pattern, INR 4,058.6 in this case. Currently, the pattern is in the completion phase. Conservative investors might want to wait for the confirmation till the above-mentioned level is breached but that would require letting go a significant move from the current levels. Therefore, aggressive and high-risk traders can see opportunities from the current levels as well.
Once the stock delivers a successful breakout above INR 4,058.6, the target for this pattern could lead to a further rally till the level of INR 4,900. One thing to note is that the sentiments in the IT sector are currently not-so-good, therefore, investors must be cautious in the IT space.
Disclaimer: The above-mentioned security is not a recommendation to buy/sell/hold the same.
The Indian markets opened the session with a noticeable gap up on Tuesday. The benchmark index surged 1.31% to 17,852 by 10:06 AM IST with all sectoral indices trading in the green zone. Even the IT pack is raking up good gains in today’s session after plunging hard in the last few days.
A mid-cap IT stock that has come on my radar amid today’s roaring markets is Coforge (NS:). The company has a market capitalization of INR 19,721 crores and is engaged in providing computer programming consultancy and related activities. The stock had taken a heavy beating in the last few days, all thanks to the consistent hammering of the IT space.
However, today there has been an interesting development that is taking place, which is making this stock a very low risk-to-reward opportunity. Amid the past few day’s fall, the stock tanked to a level of around ~INR 3,200 which is almost the same level from where the stock had taken support in June 2022, when it bottomed out. After this low, the stock rallied to over INR 4,000, hence this support zone seems to be of high importance.
Image Description: Daily chart of Coforge showing formation of a double bottom pattern
Image Source: Investing.com
Now, today’s support again at these lows has further confirmed the intense buying pressure which is outstripping supply as investors are finding these levels quite lucrative. The combined price action from mid-June 2022 till today has translated into the formation of a double bottom chart pattern on the daily chart.
This is a reversal pattern and is often known to reverse a prior downtrend. The beauty of this pattern is the extremely low risk-to-reward ratio it provides. If gone wrong, the exit levels are very near, if the reversal happens the rewards could be significant.
However, the double bottom pattern is yet to give a confirmation which is a rally above the highest peak between the two troughs of the pattern, INR 4,058.6 in this case. Currently, the pattern is in the completion phase. Conservative investors might want to wait for the confirmation till the above-mentioned level is breached but that would require letting go a significant move from the current levels. Therefore, aggressive and high-risk traders can see opportunities from the current levels as well.
Once the stock delivers a successful breakout above INR 4,058.6, the target for this pattern could lead to a further rally till the level of INR 4,900. One thing to note is that the sentiments in the IT sector are currently not-so-good, therefore, investors must be cautious in the IT space.
Disclaimer: The above-mentioned security is not a recommendation to buy/sell/hold the same.