The share price of Vodafone Idea (NS:VODA) is not much talked about as it generally does not give a one-sided sustained trending move and has been almost dead for more than two years. While low-ticket counters fancy traders for their sharp rallies, this stock is somewhat different and only moves on the news.
In June 2022, the stock fell to mark the year’s low of INR 7.75 and since then it has only moved sideways, with a slightly up move by mid-September 2022 and a down move of equivalent magnitude, thereafter. So broadly, the stock hasn’t gone anywhere. Today, it again fell to the exact same low of INR 7.75, which was expected to keep the stock from falling further, as this support has been proven in the past, and that’s what happened today.
Image Description: Weekly chart of Vodafone Idea
Image Source: Investing.com
But interestingly, we are seeing a massive surge in the share price from here. Today, the stock surprised investors with a 12% gain to INR 8.85, and this stellar rally pared all of the losses since 11 October 2022, in just a few hours! As the stock has risen from the exact same support, it could probably be heading to make a double-bottom chart pattern. Although this is a very early phase to determining the pattern formation, the probability is quite high. Upon the breakout of resistance of INR 10, the pattern would be marked complete.
Image Description: Daily chart of Vodafone Idea
Image Source: Investing.com
However, traveling to INR 10 would also mean missing out on a decent move from the CMP of INR 8.85. This is where another criterion for entry in a probable double bottom pattern is used. A double bottom is a reversal pattern and therefore a different reversal indication can be used, in case the pattern is not complete and investors want to make a premature entry. A trendline breakout is a good indication here.
A trendline from the peak of INR 10.10, which is the probable breakout point of the double pattern, is drawn, marking the downtrend of the third phase of the pattern (when the stock is heading down to mark the second bottom). Once the stock breaks this trendline, it indicates that the bottom has finally been made and a reversal has started. Vodafone Idea shares have broken this trendline in today’s session, and therefore investors can pre-empt a double bottom pattern.
Very obviously, initiating a long position after a 12% surge is not a good idea, and waiting for a retracement could be more fruitful. If this price action is to materialize into a double bottom pattern, then a level of INR 10 is quite achievable.
Disclaimer - I have Vodafone Idea shares in my portfolio.