Confirmed ‘Triple Bottom Breakout’ in this Midcap!

  • Stock Market Analysis

The Nifty Pharma index has closed this week with a decent rally of 2.37% on top of the preceding week’s gain of 3.94%. This space seems to be coming on investors’ radar and one counter that is looking an absolute bliss on the charts is GlaxoSmithKline Pharmaceuticals Limited (NS: GLAX ).

It is a mid-cap pharma company with a market capitalization of INR 22,483 crores. Its FY23 revenue saw a dip of 28.6% YoY to INR 3,355.43 crores and consequently, the net income fell 63.9% to INR 610.69 crores in the same period. The lower earnings seem already discounted in the share price of the company as it has underperformed the sector with its negative 7.7% return in the last 12 months, compared to the Nifty Pharma index gain of 3.9%.

Image Description: Weekly chart of GlaxoSmithKline Pharmaceuticals with volume bars at the bottom

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On the technical front, after a steep fall of around 36%, from a major peak of INR 1,918.75, marked in December 2021 to the 52-week low of INR 1,227, marked in the previous month, the stock finally seems to be bottoming out. One major signal that is projecting the end of this downtrend is the formation of a triple-bottom chart pattern.

This is a popular pattern that is known to reverse a downtrend toward an uptrend. The placement of such reversal patterns on the charts also holds importance and their reliability increases if they form at an extreme end (either top or bottom) of the chart. In the case of GlaxoSmithKline Pharmaceuticals, the formation has taken place at the 52-week low which is a good sign. Another interesting this is, the pattern has formed on the weekly time frame, making it more important than the same pattern on a lower time frame (daily or even intraday).

The breakout of this triple bottom was completed on Friday with a 4.8% rally to INR 1,390.95, closing above the resistance of INR 1,335 - INR 1,350. Although the volume figure in the breakout week is not very high, still, it is the highest weekly volume since September 2022. As the stock is noticeably above the resistance, waiting for a retracement might be a better idea than jumping the gun and trying to go long at the CMP. The stock now holds the potential to rally to the next resistance of INR 1,480.

Read More: 3 Quality Shares Paying Dividends Next Week!

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