The stock is on the verge of a breakout from a Flag pattern. Hence, short-term traders can look to buy the stock for a retest of its record high and a possible move towards 1500 levels, suggest experts.
The stock hit a record high of Rs 1314 on 21st November 2023, but it failed to hold on to the momentum. The stock closed at Rs 1184 on 26th December which translates into a downside of about 10%.
A bullish flag is usually formed in stocks with strong uptrends and is considered a continuation pattern. The pole is formed from the vertical rise seen in the stock price while the flag resembles the period of consolidation.
“Narayana Hrudayalaya stock is retracing for a dip further to extend the bullish rally to the new ATH. The chart structure is a classic example of how stock consolidates and moves out to break and how previous resistance becomes support,” Lovelesh Sharma, Founder at MarketFeds Analytics LLP, said.
“After the breakout from a rectangle pattern, the stock rallied towards 1300 odd levels and, at present, is undergoing a correction, which is forming a Flag pattern,” he said.
“The flag is a short-term continuation pattern widely traded and observed by traders and short-term investors. This pattern allows entering an upward-trending stock at a reasonably favourable price with lower risk,” explains Sharma.
In terms of price action, the stock is trading well above most of the crucial short- and long-term moving averages such as 5,10,30,50,100 and 200-DMA on the daily charts which is a positive sign for the bulls.
The Volumes display classic behavior as they continue to deteriorate throughout the pattern, but a recent surge is seen as we observe a partial fill. A partial fill usually indicates the direction of the eventual breakout.
“The mid-term 50-day Moving average continues to slope up, indicating the overall trend is positive, while contraction of 20 and 50 MA indicates the stock has strong support in the zone of 1130 – 1150,” said Sharma.
“Lastly, this level coincides with the previous Top of the rectangle pattern at the 1132 level. Hence, the previous resistance acts as a support, an inflection point,” he explained.
“All this evidence suggests that short-term to mid-term investors and traders must keep a close watch on NH, which must be on your watchlist. We recommend a Buy on NH at 1180 – 1150 levels for an upside to 1280 and a further 1496 (0.75x of Pole),” recommended Sharma. A stop loss for this position can be kept at 1120 on a closing basis.
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(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
