Punjab National Bank is trading in an up move while forming inverse head & shoulders pattern and this emerging pattern will be completed on a close above Rs 67.75 marks.
In technical analysis, an inverse head and shoulder (H&S) pattern describes a specific chart formation that projects a bearish-to-bullish trend reversal. An inverse head and shoulder reversal pattern forms after a downtrend, and its completion marks a trend reversal to uptrend.
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 the inverse H&S pattern.
Punjab National Bank is trading in an up move while forming an inverse head and shoulders pattern, and this emerging pattern will be completed on a close above the Rs 67.75 mark.
This stock is trading near a strong resistance line standing around Rs 67.75 levels, which is tested multiple times earlier, also suggesting a strong bullish bias to continue further after a breakout.
The recent formation of inverse H&S classical pattern will give a breakout by trading only above the Rs 67.75 mark, which suggests buying in the stock for higher target of Rs 79. The volume will also add further insight while trading these patterns. Decent volume participation, while giving breakout will also give support to the inverse H& S pattern.
Buy signal:-1. A decisive close above the neckline (67.75) of inverse H&S 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 augurs well with bulls as prices are sustained and trading above it.
4. Decent volume participation while the pattern breaks out will also give additional confirmation.
The target as per inverse H&S pattern is calculated by adding height of head (H) to neckline which comes to 79. However one can book profits near the previous swing high, which is around Rs 77 levels.
Entire bullish view negates the breaching of right shoulder on a closing basis, and one should exit from the long position. In the case of PNB, it is placed around the Rs 62 level.
We recommend buying Punjab National Bank (PNB) above Rs 67.75 level with a stop loss of Rs 62 for higher targets of Rs 79 as indicated in the 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.LIVE NOW... Video series on How to Double Your Monthly Income... where Rahul Shah, Ex-Swiss Investment Banker and one of India's leading experts on wealth building, reveals his secret strategies for the first time ever. Register here to watch it for FREE.