Bottom Fishing: A Midcap IT Stock Makes ‘Hammer’ Pattern at 52-Week Low!

  • Stock Market Analysis
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Today’s fall might scare some short-term traders but any decent fall could be a good opportunity for long-term investors to accumulate their favorite shares. However, trying to catch a falling knife is always a high-risk strategy. Therefore, investors should look for some signs of a slowing downward momentum before attempting to deploy their hard-earned cash in a falling stock. 

One stock in the IT space has just shown the first sign of a reversal after a consistent downtrend. The company is a midcap IT solutions provider Oracle Financial Services Software Limited (NS: ORCL ), having a market capitalization of INR 25,849 crores. The company caters to the financial sector’s need for IT solutions for treasury operations, investment banking, etc.

The IT pack has given a deep pain to investors this year, primarily on the back of increasing interest rates across the globe. The sector had been battered by investors so much that even the record plunge of the rupee against the US dollar doesn’t seem to cap the fall. The IT sector in India is an export-oriented space and therefore weakness in the Indian rupee helps them to increase their earnings.

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

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Today, most IT stocks hit their 52-week lows on the back of weak market sentiments. But probably, this is the ideal time for long-term investors to take their call. OFSS shares, after consistently plunging since mid-August 2022 but now seem to be making a bottom near the current levels. The stock plunged to a 52-week low of INR 2,921.15 in today’s session but the intraday recovery is making a hammer candlestick pattern on the daily chart.

A hammer is a one candlestick pattern that is a well-known reversal indicator. This pattern is called a hammer because the candlestick has a small real body at the top and a long lower shadow which is roughly twice as long as the real body. This price action results in the formation of a hammer-like candlestick. 

The placement of this pattern is also important. As it is known to reverse the prior downtrend, the stronger the downtrend, the better the reversal could be. The formation of this pattern at the 52-week low depicts a very strong prior downtrend hence, a formation of a reversal pattern here is of high significance.

The session is still on and therefore investors should wait for the closing to confirm the candlestick pattern. Any rally above today’s high would further increase the confidence of the bulls. Although a higher volume on days like this would be much preferred but that is not the case so far.


Disclaimer: The above article is not a recommendation to buy/sell/hold any security.

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