Target as per Cup & Handle pattern is calculated by adding height of Cup to neckline which comes to Rs 232, however one can book profits near previous swing high which is around Rs 230.
What is the Cup & Handle Pattern?
The Cup & Handle chart pattern is popular and easy to spot pattern. In the traders community, the Cup & Handle pattern is believed to be one of the most reliable and popular patterns.
In technical analysis, Cup & Handle pattern describes a specific chart formation that projects a bearish-to-bullish trend reversal.
Why to Buy Hindalco Industries?
A Cup & Handle reversal pattern forms after a down trend, and its completion marks a trend reversal. Cup & Handle patterns are an integral part of technical analysis, but successful traders combine these techniques with technical indicators and other forms of technical analysis to maximise their odds of success.
In the standard Cup & Handle pattern, we connect the high after cup with the high created after the handle. A trend line is drawn by connecting these highest points of the two peaks, which is called as “Neckline". This trend line is the most important component of Cup & Handle pattern.
Hindalco is trading above strong resistance line standing around Rs 207 levels indicating strong bullish bias. Recent formation of Cup & Handle pattern has given a breakout by trading above Rs 207 marks which suggests buying in the stock for higher targets of Rs 232.
Volume can also add further insight while trading these patterns. Decent volume participation while giving breakout is also giving support to C & H pattern.
Buy Signal:- Recent closing price (Rs 215) is trading above neckline (Rs 207) of Cup & Handle pattern indicating trend reversal to uptrend.
- Short- term moving average 20 DMA defines short-term trend is providing support to buyers as prices are sustained and trading above it at 205 marks.
- Mid-term moving average 50 DMA (198) defines mid-term trend is very well augur with bulls as prices are sustained and trading above it around 215 marks.
- Decent volume participation while pattern breakout is also giving additional confirmation.
Target as per Cup & Handle pattern is calculated by adding height of cup to neckline which comes to Rs 232, however one can book profits near previous swing high which is around Rs 230.
Entire bullish view negates on breaching of the handle on closing basis and one should exit from long position. In case of Hindalco, it is placed around Rs 194 levels.
We recommend buying Hindalco Industries (HINDALCO) around Rs 210 and lower towards Rs 207 levels with a stop loss of Rs 194 for higher targets of Rs 232 as indicated in above chart.
The Author is Head - Technical Research at Narnolia Financial Advisors Ltd.Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.