BIG Inverse H&S Breakout Throws Stock 8% Up, Volume Soars 700%!

  • Stock Market Analysis
  • Editors Pick

As the market sentiments remain positive on Tuesday, many stocks are trading in the green zone. BSE Ltd (NS: BSEL ) is one such counter that is going all guns blazing in today’s session, with the stock rallying around 7.3% to INR 491, by 2:12 PM IST. It is a small-cap stock exchange that facilitates the trading of stocks, debt instruments, derivates, etc. having a market capitalization of INR 6,203 crores.

It is essentially a duopoly sector wherein only two prominent stock exchanges are operating, and out of both, only BSE is the listed one. The stock trades at a TTM P/E ratio of 30.41 and a decent dividend yield of 2.94%.

Image Description: Daily chart of BSE Limited with volume bars at the bottom

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Today, the stock delivered a massive breakout on the charts as it surged past the neckline of an Inverse Head & Shoulders chart pattern on the daily time frame. This is a very robust reversal pattern and indicates an end to the downtrend. The stock has taken quite a hefty beating in the last one year, falling around 43% which makes it a good candidate for a mean-reversion trade.

With the formation of the Inverse H&S pattern, the confidence in this reversal trade has increased manyfold. To further gauge the reliability of the breakout, traders should look at the volume figures today. As of writing, a total of 3.93 million shares have exchanged hands so far, which is a staggering 718% higher than the 10-day average volume of 480K shares. This massive volume spike on the breakout day is showing investors’ increasing interest in this stock.

Now, on the upside, the level which should be eyed by long traders is around INR 545. However, as the stock has run up decently in today’s session, it would be better to wait for some retracement toward the breakout level of INR 475, which has a high chance. The stop loss for this pattern is generally placed below the low of the right shoulder, which is INR 447 in this case. Even if the stock falls below this level, still that won’t negate the probability of the resumption of an uptrend, considering the already beaten-down levels of this counter.

Read More: 3 Stocks Giving Dividends Next Week!

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