Chart Check: After 16% returns in Nov, this life insurer breaks out from inverse head & shoulder pattern

Aditya Birla Capital, part of the life insurance space, recently broke out from an inverse head & shoulder pattern on the weekly charts suggesting that the momentum is likely to take the stock to fresh 52-week highs.

An inverse head & shoulder pattern is the mirror image of the head and shoulder pattern and is a bullish signal. The neckline of the pattern was placed above Rs 120.

It is defined as three bottoms with the middle bottom (head – marked as H) significantly lower than the other two bottoms (left and right shoulders – marked as S). Also Read

The stock rose from Rs 118 on October 31 to Rs 135 on 25 November which translates into an upside of over 16% so far in November.

The stock with a market capitalisation of more than Rs 32,000 crore hit a 52-week high of Rs 139 on 11 January 2022, but it failed to hold on to the momentum.

The stock recouped most of the lost glory and is on the verge to hit fresh 52-week highs. The recent price action suggests that the upside remains intact.

Short-term traders can look to buy the stock now or on dips for a possible target of Rs 170 in the next 5-6 weeks, suggest experts.

The sock rose more than 8% in a week and nearly 18% in 3 months.


In terms of price action, the stock is trading above most of the crucial short- and long-term moving averages of 5,10,30,50,100, and 200-DMA which is a positive sign for the bulls.

The Relative Strength Index (RSI) is at 73.8. RSI above 70 is considered overbought. This implies that the stock may show a pullback. MACD is above its center and signal line, this is a bullish indicator.

Post March 2021, Aditya Birla Capital started to get into higher high, and higher low formation illustrating the beginning of an uptrend.

“Ratio charts versus Nifty have shown a breakout which suggest the outperformance of the stock against benchmark,” Omkar Patil, Technical Research Associate at GEPL Capital, said.

“The stock post the breakout of inverse head & shoulder pattern have retested the neckline and have shown a bounce to the upside,” he said.

RSI on the weekly timeframe has shown a range shift on the weekly timeframe reflecting the rising momentum in the stock

“Going ahead, we expect the prices to go higher till the level of Rs 170 where the stop loss must be Rs 120 on the closing basis,” recommends Patil.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)