A Strong Inverse H&S Pattern is Ready to Propel this Stock Higher!

  • Stock Market Analysis
  • Editors Pick

While the broader markets are trading on a weak note today, owing to negative cues from Wall Street, some stock-specific action has been happening in some pockets. The Nifty 50 index is down over 0.5% to 15,770, by 11:10 AM IST, with all the sectoral indices trading in the red, one stock is making some noise with its decent intraday gains.

A slightly expensive stock, 3M India (NS: TMIN ) has come to investors’ radar as the stock is going against the grain in today’s session, delivering a lucrative return of 2.12% to INR 22,456. Today’s gain was a continuation of yesterday’s rally of 5.64%, totalling a cumulative gain of over 7.7% in two sessions. In fact, for the last four sessions, the stock has been closing on a positive note.

However, the eye-candy for investors in the shares of 3M India is the construction of a nearly picture-perfect inverse Head and Shoulders chart pattern on the daily chart. This is an extremely bullish pattern that is famous for reversing a prior downtrend into an uptrend. As the breakout and the impending move of this pattern generally lasts for a long time, this pattern also takes a couple of months to form (the longer the time taken, the stronger would be the trend reversal). In the case of 3M India shares, this pattern has taken almost 4 months to be completed, which is a good sign.

Image Description: Daily chart of 3M India showing an Inverse Head & Shoulders chart pattern

Image Source: Investing.com

An inverse Head and Shoulders pattern is inverse to a more popular Head and Shoulders pattern and the implications are also opposite. 3M India shares made a bottom of the left shoulder on around 15 March 2022 and the follow-up rally to complete the shoulder finished by 20 April 2022. The next fall and rise to mark the head of the pattern were also completed by early June 2022, followed by the completion of the right shoulder which is around the same depth as the first one, which is always preferred. 

The breakout of this pattern came yesterday when the share price of 3M India comfortably closed above the neckline (resistance) with a decent surge of over 5%. However, the volume on the breakout was below the 10-day average which is not a healthy sign, hence, investors must be cautious of the breakout failure.

As far as the target of this pattern is concerned, the calculation is exactly the same as its counterpart. The height of the pattern is added to the breakout level to arrive at the optimal potential of the rally, which is coming out to be around INR 26,300. If the stock falls back below the neckline, investors should become skeptical about the breakout. A further plunge below the right shoulder’s low would completely negate the pattern breakout.  

Disclaimer: This is not an investment advice and investors must do their own due diligence before making an investment decision.

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  • Shyam Sundar De @Shyam Sundar De
    you have no tecknike knowledge. inverse H&S negative single 22/06/2022.
    Like 1
  • Shyam Sundar De @Shyam Sundar De
    you have no tecknike knowledge. inverse H&S negative single 22/06/2022.
    Like 0

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