The Cup & Handle (C&H) pattern is believed to be one of the most reliable and popular patterns among the trader community. In technical analysis, C&H pattern describes a specific chart formation that projects a bearish-to-bullish trend reversal.
A C&H reversal pattern forms after a downtrend, and its completion marks a trend reversal to an uptrend. In the standard C&H 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 the C&H pattern.
Why buy Ujjivan Financial Services?
Ujjivan Financial is having a strong resistance line standing around Rs 362 levels indicating strong bullish breakout only above these levels.
The recent formation of the C&H pattern will give a breakout on a weekly close above Rs 362 marks which suggests buying in the stock for higher targets of Rs 500. 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:
1. A close above Neckline (RS 362) of C&H pattern is indicating a trend reversal to an uptrend.
2. Short- term moving average 20 DMA defines short-term trend which is providing support to buyers as prices as it is sustaining and trading above it at Rs 360 marks.
3. The mid- term moving average 50 DMA (Rs 313) defines mid-term trend is very well augur with bulls as prices are sustained and trading above it around Rs 360 marks.
4. Decent volume participation while pattern breakout will also give additional confirmation.
Profit Booking:
Target as per C&H pattern is calculated by adding the height of Cup to the Neckline which comes to Rs 520, however one can book profits near previous swing high which is around Rs 500.
Stop Loss:
Entire bullish view negates on breaching of Handle on a closing basis and one should exit from a long position. In the case of Ujjivan Financial, it is placed around Rs 298 levels.
Conclusion
We recommend buying Ujjivan Financial Services above Rs 362 with a stop loss of Rs 298 for higher targets of Rs 500 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 experts 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.
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