“Ascending Triangle Break-Out”
After hitting an intermediate low of Rs1,660 in April 2013, Bajaj Auto has been on a steady uptrend. On the daily charts, strong accumulation was witnessed between Rs1,660 - Rs2,160 for almost 14-months.
During this consolidation phase, the stock formed an ascending triangle pattern, which is considered to be bullish. For the first time, following a long drawn consolidation, Bajaj-Auto broke out of the “Ascending Triangle Pattern” on May 23, 2014 on the daily charts. The breach has been accompanied with steady up-tick in traded volumes, adding credence to the breakout.
Negation of “Head and Shoulder pattern”
The head and shoulder pattern, a bearish one, which is clearly visible on the daily chart has been negated as the stock pushed back above the peak of right shoulder which was placed at Rs2,103 level.
What is Head &Shoulder Pattern?
Head and shoulder is areversal pattern that, when formed, signals the stock is likely to move againstthe previous trend.
Negation of a bearish structure further indicates that Bajaj Auto is on a road to uncharted territory.
With the stock’s primary trend pointing upward and given the above evidence, we recommend a BUY on Bajaj Auto for a potential target of Rs. 2,670 in the medium term. We advise traders to maintain a strict Stop Loss of Rs. 1,997.