Chart of the day! - 13th December 2022

CHART OF THE DAY

• Welcome to the 7th edition of COTD (Chart of the day series). I'm back after taking a long weekend break & feeling pretty refreshed now :)

• A little disclaimer before I start, this is not a buy/sell recommendation. My purpose on starting this series was to reveal my understanding of charts and what things make them bullish or bearish for me. As everything is personal to me, I am a human and I make mistakes too. I may be wrong anywhere so please don't take these as tips. All this is done just to educate you so look at it that way only please.

Below is today's chart of the day!

Bajaj Healthcare

What's making me feel bullish about this?

• Breakout :- From the end of July 2022, the stock consolidated to form an inverted Head & Shoulders pattern which it broke out on 2nd of December with volume confirmation. This shows that the buyers have been dominant in this counter and have won a war just few days ago. It increases the probability of them being able to win in the future as well driving the price up and up.

• Tightness :- After breaking out from that Inverted Head & Shoulders pattern, it went up and immediately entered in a narrow range contracting very tightly to make a kind of flag pattern. Flag patterns come under continuation patterns which act like an extension to an existing uptrend. 

• Past volumes :- The past volumes in this scrip have been really high. You can decode this by looking at those huge green building at the bottom. The red buildings look so tiny when compared to them! High volumes during prices uptrends conclude that the buying interest has been pretty strong in the stock. 

• Recent volumes :- If you would look closely in the daily time frame chart, you would notice that the past 6 day volumes are so much low when compared to the volumes before. This when accompanied with narrow range of prices (like it is in the above chart, refer to tightness), shows that the supply has been drying off & whichever side it breaks, it might result in an explosive move. 

• Candles :- You would look closely at the past two candlesticks, you would notice that both of them are kind of hammer candles. Hammer candles are those which have long lower wicks and they generally signal that there is a strong buying interest from the buyers. It means that the buying was strong enough the completely absorb the selling before making the big lower wick candle.

 But for now, its time to play the waiting game. Where we, as traders wait for the right opportunity which gives us the validation & then we pounce on in hope of making some money. In this chart, we would wait for a breakout in this flag pattern & then enter only after the stock justifies our risk management setup. No breaking of rules, promise to yourself!

So, above are the reasons why I am bullish on the Bajaj Healthcare daily time frame chart. Do you have any other points that went unnoticed by me? Feel free to share them in the comments below!

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