Price action screaming buy!! Or is it as simple as it looks?
If we go by the textbook definition of a falling wedge pattern, the price consolidates between two downward sloping & converging lines forming a wedge shape. (Not as difficult as it sounds, just looks at the chart).
As per a common understanding of this pattern, the price continues higher after a breakout to the upside.
Price action in LIC Housing finance shows a nice breakout of the falling wedge pattern.
The price broke out with a strong candle and above-average volumes.
This is a perfect condition for a buy trade.
But wait, This is not the complete technical picture. Keep reading
We recently saw how a bullish Inverse head & shoulder pattern failed in HDFC, even though it had a perfect breakout condition, Positive news about the merger and almost all ideas on trading view were out rightly bullish. (Check HDFC idea in my profile, neutral and saved myself from loss)
If it were as simple as identifying a pattern and taking a trade, everyone would be making profits in the market.
Back to LIC Housing Finance:
Along with the falling wedge, there are other technical factors.
Two important levels to watch are the 200 days moving average, and the Horizontal S&R line at 389.25.
The price has taken support or resistance at this line multiple times in the past.
Let’s look at the positives first:
• Perfect falling wedge pattern & breakout with a strong candle and good volumes.
• MACD trending higher and in positive territory. RSI Strong, and other indicators in the positive territory.
• Price finished its correction exactly at 61.8% Fibonacci ratio with Price RSI positive divergence before the correction ended.
Now the Caution Signals:
• Price trading below Strong resistance line at 389.25 and struggling to cross above.
• Price below 200 days moving average (a strong resistance level). 200DMA currently trading at @400.
• Whole numbers are considered psychological S&R levels and 400 is a psychological level.
• Fibonacci 38.20% level @ 405.60 may act as minor resistance.
Combining these points, we get a strong resistance zone between 389 to 400 and minor resistance at 405.
A breakout above the wedge pattern is the first signal. The price has to breakout above the resistance zone.
If the breakout happens, wait for the price to retest 200dma or Horizontal line @ 389, whichever is higher at the time.
I give more weightage to Horizontal S&R lines because these are the points where most buyers/sellers are concentrated.
200DMA is definitely a strong resistance and there will be many sellers at this level.
I’m cautiously bullish on this stock.
The best way to avoid failure is to wait for the price to give us a confirmation.
I will be following the price movement closely and update this idea when I get a buy/sell signal. So follow me and stay tuned for the next update.
Post your comments. Let’s have a discussion.
Happy trading.
Co-Authors:
in.tradingview.com/u/Sai_Kumar/
in.tradingview.com/u/sankalp_ray/
Disclaimer:
This is not buy/sell advice. Please do your due diligence before making any trading decision or consult your financial advisor.
Sharing my analysis and thoughts for a stronger and healthier community. Cheers
As per a common understanding of this pattern, the price continues higher after a breakout to the upside.
Price action in LIC Housing finance shows a nice breakout of the falling wedge pattern.
The price broke out with a strong candle and above-average volumes.
This is a perfect condition for a buy trade.
But wait, This is not the complete technical picture. Keep reading
We recently saw how a bullish Inverse head & shoulder pattern failed in HDFC, even though it had a perfect breakout condition, Positive news about the merger and almost all ideas on trading view were out rightly bullish. (Check HDFC idea in my profile, neutral and saved myself from loss)
If it were as simple as identifying a pattern and taking a trade, everyone would be making profits in the market.
Back to LIC Housing Finance:
Along with the falling wedge, there are other technical factors.
Two important levels to watch are the 200 days moving average, and the Horizontal S&R line at 389.25.
The price has taken support or resistance at this line multiple times in the past.
Let’s look at the positives first:
• Perfect falling wedge pattern & breakout with a strong candle and good volumes.
• MACD trending higher and in positive territory. RSI Strong, and other indicators in the positive territory.
• Price finished its correction exactly at 61.8% Fibonacci ratio with Price RSI positive divergence before the correction ended.
Now the Caution Signals:
• Price trading below Strong resistance line at 389.25 and struggling to cross above.
• Price below 200 days moving average (a strong resistance level). 200DMA currently trading at @400.
• Whole numbers are considered psychological S&R levels and 400 is a psychological level.
• Fibonacci 38.20% level @ 405.60 may act as minor resistance.
Combining these points, we get a strong resistance zone between 389 to 400 and minor resistance at 405.
A breakout above the wedge pattern is the first signal. The price has to breakout above the resistance zone.
If the breakout happens, wait for the price to retest 200dma or Horizontal line @ 389, whichever is higher at the time.
I give more weightage to Horizontal S&R lines because these are the points where most buyers/sellers are concentrated.
200DMA is definitely a strong resistance and there will be many sellers at this level.
I’m cautiously bullish on this stock.
The best way to avoid failure is to wait for the price to give us a confirmation.
I will be following the price movement closely and update this idea when I get a buy/sell signal. So follow me and stay tuned for the next update.
Post your comments. Let’s have a discussion.
Happy trading.
Co-Authors:
in.tradingview.com/u/Sai_Kumar/
in.tradingview.com/u/sankalp_ray/
Disclaimer:
This is not buy/sell advice. Please do your due diligence before making any trading decision or consult your financial advisor.
Sharing my analysis and thoughts for a stronger and healthier community. Cheers
