This JhunJhunwala Stock is Reversing From Oversold Zone!

  • Stock Market Analysis
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The big bull Rakesh Jhunjhunwala might finally see some relief in one of his stock holdings which has performed horrible bad in the last few weeks. Although most of the mid-caps have corrected this year from their recent highs, some stocks have severely underperformed their benchmark index, tanking to all-time lows.

One such stock is Star Health and Allied Insurance Company Ltd (NS: STAU ) (Star Health) which is a mid-sized insurance provider with a market capitalization of INR 27,304 crores. According to the latest filing, Rakesh Jhunjhunwala owns roughly about 10,07,53,935 shares, accounting for a total of 17.51% stake in the company. 

The share price of Star Health has been tumbling quite aggressively for the last many sessions. The company is a recent listing on the NSE, having marked its debut on 10 December last year. Since the listing, the stock has only been seeing a southward direction. In fact, the all-time high of Star Health shares of INR 940 was on the listing day itself, meaning the stock never rose above its listing day’s high. As the downtrend continued, yesterday, the stock tanked to an all-time low of INR 469.05, depicting a massive 49.8% value erosion from the top.

Image Description: Daily chart of Star Health and Allied Insurance 

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However, today seems to be bringing a ray of hope for the stock as there is a clear formation of a bullish engulfing candlestick pattern on the charts which indicates a bullish reversal. In this pattern, the latest candle opens below the close of the previous day’s bearish candle and closes above the open of the previous day, hence ‘engulfing’ the previous candle’s real body. Although the market is still open and we have to wait till the end of the session to finally call it a bullish engulfing (if it closes above the previous open).  The placement of this pattern on the charts also matters. The lower the formation on the chart which indicates a strong prior bear trend, the stronger the reversal could be. In the case of Star Health, the formation has taken place at all-time lows which is a cheering signal for the bulls.

The reason is, that the stock had already become highly oversold which is depicted by a reading of 16.47 by the RSI (daily, 14) yesterday, a further formation of this reversal pattern adds to the credibility of the impending up move. 

Currently, the stock is trading 4.04% up at INR 492.15 by 11:50 AM IST, making the first green candle in the last 14 sessions. The reversal from the current levels could touch the nearest resistance of INR 600, which is a decent upside potential of 21.9%. If the stock falls below the all-time low of INR 469.05 marked yesterday, then the downtrend might keep on continuing for some more time.

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