‘Cup & Handle’ Pattern is ready to Propel this Stock 22% Higher!

  • Stock Market Analysis
  • Editors Pick

The cement sector is one of the most buzzing spaces in today’s session with many counters such as India Cements (NS: ICMN ) & UltraTech Cement Ltd (NS: ULTC ) not just trading in the green zone but also outperforming the broader markets. 

One stock from this sector that is looking good from a technical point of view is JK Lakshmi Cement Limited (NS: JKLC ) which is a small-cap cement manufacturer with a market capitalization of INR 7,958 crores and trades at a P/E ratio of 17.17, compared to the sector’s average of 13.62. 

Talking about the chart structure of the stock, it has delivered a breakout from a Cup & Handle pattern on the daily time frame. It is a bullish continuation pattern that helps the stock to resume the prior up trend after a brief halt. It is not a reversal pattern, but can also be found amid a prolonged downtrend.

Image Description: Daily chart of JK Lakshmi Cement

Image Source: Investing.com

In this, the stock rallies due to a persistent uptrend but soon takes a halt in the form of a mild retracement. This correction is not very sharp but is in the shape of a very smooth rounding bottom. If this pattern forms with a very sharp V-shape-like bottom, then it should be avoided due to heightened volatility, although it may still continue to the bullish move. 

After forming this rounded base (which is called the cup), the stock rises back to around the previous highs, from where it initially started declining. This level becomes a strong resistance and therefore a correction is again expected but not as deep as the prior one (the cup). From here the correction again kicks in but this time it's quite shallow and sharp, which eventually forms the ‘handle’ of the cup. 

After recovering from this correction, the stock tends to deliver a breakout above the resistance which finally marks the completion of the pattern and the continuation of the bullish trend. This is the same price action that is happening in the case of JK Lakshmi Cement and therefore a strong rally from here is expected. 

The expected target of this pattern is calculated by measuring the height of the cup and adding it to the breakout level. In our case, this mechanism is giving the expected target of around INR 840 - INR 845 in the future. This means a potential rally of around 22% from the CMP of INR 698, as of 1:54 PM IST. 

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  • Deepak Chandratre @Deepak Chandratre
    Thanks 🙏
    Like 1
  • SANJAY SHAH @SANJAY SHAH
    Many time the pattern fails n price dont reach target see chart of Thirumalai chemical
    Like 3
    • arun singh mehra @arun singh mehra
      @SANJAY SHAH true if we see the chart of jk lakshmi cement then recently it was almost 50% down from its peak. I would not suggest to go for such a stock
      Like 0
    • payal setiya @payal setiya
      True many times this pattern fails same happened with fortis.
      Like 0
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  • Vinayak Ingalgi @Vinayak Ingalgi
    👌👌
    Like 0
  • Dakshina Murthy A A @Dakshina Murthy A A
    thank you so much
    Like 1
  • lavlesh kumar @lavlesh kumar
    DIVERGENCE is there in RSI
    Like 1
    • Aayush Khanna/Investing.com @Aayush Khanna/Investing.com
      Hi Lavlesh, divergences would always be there when a stock is in a strong bull/bear run.
      Like 0
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  • namami ghosh @namami ghosh
    exhaustive explanation, Guruji.... heaping truckloads of praise...
    Like 3
    • Aayush Khanna/Investing.com @Aayush Khanna/Investing.com
      Keep 'em coming 😁
      Like 1
    • Raghunath Shinde @Raghunath Shinde
      Sir please jubilant ingrevia stocks details
      Like 0
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