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  • Even as markets slump, over 40 stocks show strong bullish bar reversal

    Publish Date: October 04, 2018

    Trends are good friends to a stock trader. As the domestic markets turn topsy-turvy in the face of a weak rupee and foreign investors' selling, it is easy to be depressed. But not everything in the market is bad. Bar patterns are short-term patterns that can indicate a change in the fortunes of a stock. And we found over 40 stocks that are showing a change for the better.

    Bar 'bar' dekho

    Bar patterns can help in timing trades and identifying effective stop-loss points for traders. Every price action trader should know about bar patterns. As one of the basic tools of technical analysis, the bar chart can be a goldmine of information. Here the open, close, high, and low values of a stock are embedded in bars. These are then plotted as a series of prices over a certain time period.

    Also read: Four technical indicators to follow

    This is where studying bar patterns becomes interesting. A bullish bar reversal occurs when today's low is lower than its low from the previous day while the current price-that is, today's close-is higher than the close of the previous day. The cases where bullish bar reversal is the strongest can become interesting trading opportunities.

    For example, RS Software stock hit a low of Rs 25.00 on 3 October compared to the previous low of Rs 25.10. But its closing price of Rs 30.70 was 20% higher than the previous close of Rs 25.10.

    Similarly, Excel Crop Care stock shows that its 3 October low of Rs 3,200.20 was lower than the previous low of Rs 3,230.85. But its close of Rs 3,573.10 was nearly 9% higher than the previous close of Rs 3,200.20.

    Other examples include Empee Distilleries, Vakrangee, Easun Reyrolle, Ind-Swift, Rane Brake Linings, India Glycols, Sakthi Sugars, BPCL, and Hind Composites.

    Do remember that bar reversals are ideal for traders who are looking for clear entry and exit points. They are normally not suitable as signals for long-term-oriented investors, unless the study is done for monthly bars.

    Read our Trading Playbook for October 4 here

    Note bearish reversals too

    A bearish bar reversal occurs when today's high surpasses the stock's high from the previous day and today's close is less than its close from the previous day. As the name suggests, it may provide an indication of a future bearish trend.

    There are over 100 stocks displaying the bearish reversal pattern. Strong bearish reversal patterns can be seen in Vodafone Idea, ICICI Lombard, Electrosteel, Sasken, New India Assurance, and Bandhan Bank, among others.

    Also read: How the domino effect works in markets

    In the case of bearish bar reversals, traders may look at some patterns to ascertain their trading strategy. The simplest one is a bearish engulfing pattern. There are other patterns too, but these would require detailed study.

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    Also read

    Source of data: https://www.moneycontrol.com/technicals/barrev/bearish/nse/strong/index.html

    Disclaimer: Investments in securities market are subject to market risks, read all the related documents carefully before investing. Our research should not be considered as an advertisement or advice, professional or otherwise. The investor is requested to take into consideration all the risk factors including their financial condition, suitability to risk return profile and the like and take professional advice before investing. By referring to any particular sector, Kotak Securities Limited does not provide any promise or assurance of favourable view for a particular industry or sector or business group in any manner. The investor is requested to take into consideration all the risk factors including their financial condition, suitability to risk return profile and take professional advice before investing. Such representations are not indicative of future results. Click here for the detailed disclaimer.

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