Inverse Head and Shoulders patterns are an integral part of technical analysis, but successful traders combine these techniques with technical indicators and other forms of technical analysis to maximize their odds of success.
What is Inverse Head and Shoulders Pattern?
The head and shoulders chart pattern is popular and easy to spot. In technical analysis, an Inverse head and shoulders pattern describes a specific chart formation that projects a bearish-to-bullish trend reversal.
Why to Buy Bharti Airtel Limited (BHARTIARTL)?
An Inverse Head and Shoulders reversal pattern forms after a down trend, and its completion marks a trend reversal to up trend. Inverse H&S patterns are an integral part of technical analysis, but successful traders combine these techniques with technical indicators and other forms of technical analysis to maximize their odds of success. In the standard Inverse head and shoulders pattern, we connect the high after the left shoulder with the high created after the head. 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 Inverse H& S pattern.
Bharti Airtel is trading in an up move while forming Inverse Head & Shoulders pattern and this emerging pattern will be completed on a close above 367 marks. This stock is trading near strong resistance line standing around 367 levels which is tested multiple times earlier and also suggest a strong bullish bias to continue further after a breakout. A recent formation of Inverse Head and Shoulders classical pattern will give a breakout by trading only above 367 marks. It suggests buying in the stock for higher targets of 460. Volume will also add further insight while trading these patterns. A decent volume participation while giving breakout will also give support to Inverse H& S pattern.
1. A decisive close above neckline (367) of Inverse Head & Shoulders pattern will give a pattern breakout.
2. Prices must trade above short-term moving average 20 DMA which will define bullish short-term trend.
3. Mid-term moving average 50 DMA defines mid-term trend is very well augur with bulls as prices are sustained and trading above it.
4. A decent volume participation while pattern breakout will also give additional confirmation.
•Target as per Inverse Head & Shoulders pattern is calculated by adding height of head (H) to neckline which comes to 460. However, one can book profits near previous swing high which is around 420 levels.
•The entire bullish view negates on breaching of right shoulder on closing basis and one should exit from long position. In case of Bharti Airtel it is placed around 321 levels.
•We recommend buying Bharti Airtel Limited (BHARTIARTL) above 367 levels with a stop loss of 321 for higher targets of 460 as indicated in above chart.
The author is Head - Technical & Derivative Research, Narnolia Financial Advisors.Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.