Double Bottom pattern in Mahindra Mahindra suggests 10% upside; time to Buy!

Double Bottom pattern in Mahindra Mahindra suggests 10% upside; time to Buy!

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Shabbir Kayyumi

What is Double Bottom Pattern?

The Double Bottom chart pattern is popular and easy to spot pattern. Chart patterns can be powerful when understood correctly; however they are the foundational building blocks of technical analysis.

The Double Bottom pattern is a bullish reversal pattern typically found on bar charts, line charts, and candlestick charts. This pattern is made up of two consecutive troughs that are roughly equal, with a moderate peak in-between.

The double bottom looks like the letter “W”. The twice-touched low is considered a support level. The double bottom pattern always follows a major or minor downtrend in a particular security, and signals the reversal and the beginning of a potential uptrend.

Why to buy Mahindra & Mahindra?

M&M chart is suggesting formation of double bottom pattern that will give a breakout by trading above Rs 555 mark, which suggests buying in the stock for higher targets of Rs 605. Decent volume participation in last week is also giving support to double bottom pattern.

M&M

Buy Signal:

1. Recent close prices (Rs 552) are trading near breakout line (Rs 555) of double bottom pattern indicating trend reversal to uptrend.
2. Decent volume participation is also giving additional confirmation.

3. Recent two swing bottoms are almost equal in price indicating proper formation of double bottom patter; however trading above Rs 555 marks will give additional confirmation for strong bulls.

Profit Booking:

Target as per Double Bottom pattern is calculated by adding height of trough to neckline which comes to Rs 605, however one can book profits near previous swing high which is around Rs 590.

Stop Loss:

Entire bullish view negates on breaching of mid-point of entire valley on closing basis and one should exit from long position. In case of M&M it is placed around Rs 522 levels.

Conclusion

We recommend buying Mahindra & Mahindra around Rs 555 with a stop loss of Rs 522 for higher targets of Rs 605 as indicated in above chart.

The author is Head – Technical & Derivative Research at Narnolia Financial Advisors Ltd.

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