Buy Bharti Airtel, Inverse Head and Shoulder Pattern suggests

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.

Buy Signal:-
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.

Profit Booking

•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.

Conclusion

•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.

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