A Reversal Pattern from 52-Week Low Pushes this Stock 5% Up!

After yesterday’s holiday, the broader markets have continued their rally in today’s session with the benchmark Nifty 50 index rising 0.6% to 17,398 by 9:55 AM IST. The sharp rally in the US and a retracement from the highs in the Dollar Index are two primary reasons for a cheerful rally in the global equity markets.

Many stocks have been beaten to quite a low level in the last many sessions when a brutal selling was going on. Now, these stocks are catching investors’ attention, all thanks to a combination of beaten-down levels and increased risk appetite of investors.

One stock that is rising from the lows is Graphite India (NS: GRPH ) which is engaged in the manufacturing of graphite electrodes, graphite equipment, steel, glass reinforced plastic (GRP) pipes and tanks and the generation of hydel power. The company has a market capitalization of INR 7,090 crores and its shares tanked nearly 40% in the last one year.

Today, the share price of Graphite India rose 5.37% to 382.5 in today’s session so far, fairly beating the NIFTY Smallcap 100 index rally of 1.49% to 9,686. The outperformance of the stock has also been on the back of the increased volume. A total of 619K shares have exchanged hands in less than an hour of trading which has already surpassed the highest volume since 16 September 2022. This volume expansion is indicating that investors are becoming aggressive in accumulating Graphite India shares around these levels.

On the daily chart, the stock is forming a much renowned Double Bottom chart pattern which indicates a trend reversal. In June 2022, the stock made a bottom of INR 350 which was the first trough of this pattern. On 28 September 2022, the stock marked the second bottom at INR 348.25 and turned its falling trend from there to a small rally and currently trading near INR 382. This rally from the second bottom is the final leg of this pattern completion. 

Technically, this pattern would be completed once the stock breaks above the peak of INR 460 which was formed between these two troughs. However, aggressive traders might think of entering around the current level so that a move till the breakout level can also be captured. This definitely increases the risk as the reversal pattern is yet to be completed but also offers a higher reward in return.

Above INR 460, the actual theoretical target of the pattern is coming out at around  INR 570 which is the height of the pattern (total distance from the middle peak to troughs) added to the breakout level.