Bharat Forge, one of the quality stocks in the auto-ancillary sector, seems to be on the way to form a Rounded Bottom on the daily, weekly and monthly charts. The Pattern would be confirmed above levels of 1352, accompanied by higher than average volumes. The closing price on the Bombay Stock Exhange is at 1147.95.

In Technical Analysis two approaches could be taken to trade such a formation

  • Ultra Risk taking Traders can take a trade right-away, with a strict Stop Loss at 1087(2ATR) for Targets of 1352. However remember a chart pattern if adopted without confirmation is failure prone and the risk here would be substantially higher.
  • Risk Averse Traders could wait for a confirmation. This could be a closing above 1352 accompanied by higher volumes. The expected move when such a confirmation happens, is the difference between the neckline and the bottom of the formation. The Targets in this case, would thus be substantially higher. However the pattern completion seems far away for now.

In the author's personal experience, the Rounding Bottom Formations are some of the better Chart Patterns, in terms of the probability of trade success. Recent Rounding Bottom Formations in companies like BEML, Gabriel etc. have created substantial rewards for the traders. However it is imperative to remember that there are no certainties in the market and every trade undertaken is just an exercise in calculated risk taking.

Disclaimer:: The article presented herewith is just an educational assessment of the chart structure of Bharat Forge. Please do your own research and consult your financial advisor prior to acting on the information presented herewith. The author does not intend to set forth this article as a recommendation to buy or sell this stock and has a small position in the stock at levels which are less than half the Current Market Price.

Arbind Kumar Roy

About Arbind Kumar Roy

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