Watchlist Stock: Inverse H&S at Lows Depicts 13% Upside!
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While digging for stocks that are reversing from the lows, prominent reversal patterns such as an Inverse Head & Shoulders should not be ignored. It is a mirror image of a more popular Head & Shoulders pattern which is known to reverse an uptrend to a downtrend.
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The price chart of Home First Finance Company Limited (NS:) is currently making this pattern. Talking about the company, it is a small-cap housing finance company with a market capitalization of INR 6,295 crores and competes with peers such as Aptus Value Housing Finance India Ltd (NS:), Aavas Financiers Ltd (NS:), etc.
The Q2 FY23 financial performance of the company was good, with an 11.8% QoQ jump in revenue to INR 189.41 crores, while net income increased by 5.9% to INR 54.28 crores in the same period. DIIs showed confidence in the company by buying a stake of 2.56%, as of September 2022, which was nil a quarter ago.
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Image Description: Daily chart of Home First Finance Company India
Image Source: Investing.com
Since the August 2022 high of INR 1,004.55, the stock has only seen a northward direction. From there, it crashed all the way to a low of INR 652 by mid-November 2022, losing a decent 35% of its entire market capitalization. But from there, demand started to outstrip the supply and the stock eventually started to inch higher.
Looking at the price action from 25 October 2022 till today, the stock is forming a very clear inverse H&S pattern on the daily chart with the left shoulder low being INR 695.15, marked on 27 October 2022, the low of the head was marked on 14 November 2022 and the right shoulder low of INR 693 was marked on 21 November 2022.
Currently, the stock is in the last phase of the completion of this reversal pattern as it is approaching the neckline resistance of around INR 750, with the CMP being INR 742, by 1:30 PM IST. Investors should wait for the breakout above the resistance level which might come by the next week. Once it breaks above this level on the back of an increased volume, the breakout would be confirmed and a potential rally could start from there.
According to the dimensions of the pattern, the next impending move could stretch to around INR 850 which is around a 13% rally from the breakout level. On the downside, the low of the right shoulder is generally used as an exit level in case the pattern fails to propel the stock.
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While digging for stocks that are reversing from the lows, prominent reversal patterns such as an Inverse Head & Shoulders should not be ignored. It is a mirror image of a more popular Head & Shoulders pattern which is known to reverse an uptrend to a downtrend.
The price chart of Home First Finance Company Limited (NS:) is currently making this pattern. Talking about the company, it is a small-cap housing finance company with a market capitalization of INR 6,295 crores and competes with peers such as Aptus Value Housing Finance India Ltd (NS:), Aavas Financiers Ltd (NS:), etc.
The Q2 FY23 financial performance of the company was good, with an 11.8% QoQ jump in revenue to INR 189.41 crores, while net income increased by 5.9% to INR 54.28 crores in the same period. DIIs showed confidence in the company by buying a stake of 2.56%, as of September 2022, which was nil a quarter ago.
Image Description: Daily chart of Home First Finance Company India
Image Source: Investing.com
Since the August 2022 high of INR 1,004.55, the stock has only seen a northward direction. From there, it crashed all the way to a low of INR 652 by mid-November 2022, losing a decent 35% of its entire market capitalization. But from there, demand started to outstrip the supply and the stock eventually started to inch higher.
Looking at the price action from 25 October 2022 till today, the stock is forming a very clear inverse H&S pattern on the daily chart with the left shoulder low being INR 695.15, marked on 27 October 2022, the low of the head was marked on 14 November 2022 and the right shoulder low of INR 693 was marked on 21 November 2022.
Currently, the stock is in the last phase of the completion of this reversal pattern as it is approaching the neckline resistance of around INR 750, with the CMP being INR 742, by 1:30 PM IST. Investors should wait for the breakout above the resistance level which might come by the next week. Once it breaks above this level on the back of an increased volume, the breakout would be confirmed and a potential rally could start from there.
According to the dimensions of the pattern, the next impending move could stretch to around INR 850 which is around a 13% rally from the breakout level. On the downside, the low of the right shoulder is generally used as an exit level in case the pattern fails to propel the stock.
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