Chart Check: Down over 20% from highs! This life insurer records a breakout from Inverse Head & Shoulder pattern

Investors who are looking to put money in beaten-down names can keep ICICI Prudential on their radar for a potential short-term target of Rs 610-640 in the next 2 weeks, suggest experts.

The life insurance company with a market capitalisation of over Rs 78,000 cr fell from after hitting a 52-week high of Rs 724.50 to Rs 548 recorded on 3 June 2022.

The stock took support near its 200-DMA on the weekly charts and bounced back after hitting a low of Rs 430 on 7 March 2022.

The price action also suggests breakout from an Inverse Head & Shoulder pattern where one part of the shoulder was formed in December 2021, and the other shoulder was formed in May 2022.

An Inverse Head & Shoulder pattern is the mirror image of the Head and Shoulder pattern and is a bullish signal.

It is defined as three bottoms with the middle bottom significantly lower than the other two bottoms.
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The stock also managed to climb above the short-term moving average of 20-DMAs recorded in May 2022 which is a positive sign for bulls.

Technically, the stock is trading above most of the crucial short-term moving averages such as 5, 10, 20, and 50-DMAs. But it is still trading below the 200-DMA placed at Rs 576.

After the sharp correction from the highs of Rs 724, ICICI Prudential took support near the Rs 430 mark (200-week SMA) and has bounced sharply from the same levels.

“In the current week, the stock has broken out of an Inverse Head & Shoulder pattern which indicates a trend reversal in the counter,” Malay Thakkar, Technical Research Associate, GEPL Capital, said.

The stock managed to sustain above the 20-week SMA (Rs 515) and breached above the previous swing high, hence negating the lower high lower low formation.

The RSI indicator on the weekly chart is also breaking out and has crossed the 50-mark indicating bullish momentum in the underlying.

“Based on the price action and technical parameters, we expect the stock to move higher towards Rs 610 followed by Rs 640 levels. Rs 515 level on the downside would act as major support for the counter,” recommends Thakkar.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)