📈 Mastering Price Action: Rounding Patterns, Flags, and Pennants (Continued)
🏆 Techno-Fundamental Stock Selection: Gujarat Pipavav Port (GPPL)
📌 Why Gujarat Pipavav Port (GPPL) is a Potential Multibagger
High-margin business with a net margin of 36%.
Strong operating cash flow and improving revenue.
Steady margin growth from 27% to 38%, signaling better capacity utilization.
PEG ratio of 0.5, making it an undervalued stock.
5% dividend yield, significantly higher than savings bank interest rates.
Stock price target: Suggested buy at ₹125-126, waiting for confirmation.
📌 Why Fundamentals Matter in Trading
Strong fundamentals support long-term confidence in a stock.
A stock with weak fundamentals may rally in the short term but eventually decline.
For long-term investing, always check revenue, margin trends, PE ratio, and dividend yield.
🔹 Lesson: Techno-fundamental stocks provide the best of both worlds—strong technical setups backed by solid financials.
🔄 Understanding Reversal vs. Continuation Patterns
📌 Reversal Patterns: Indicate a trend change.
Double Top, Double Bottom
Triple Top, Triple Bottom
Head & Shoulders (Normal and Inverse)
Rounding Top, Rounding Bottom
📌 Continuation Patterns: Indicate the trend will continue after a pause.
Triangles (Symmetrical, Ascending, Descending)
Flags & Pennants
Wedges (Rising & Falling)
📌 Why This Matters:
Knowing the difference helps traders decide whether to enter a reversal trade or wait for continuation confirmation.
🔵 Rounding Patterns: Long-Term Trend Indicators
📉 Rounding Top: A Slow Transition from Bullish to Bearish
Formation: Price gradually curves downward, forming a rounded shape.
Breakout Signal: Once the price breaks the neckline, expect a strong downward move.
Example: Bank of Baroda showed a rounding top, followed by a breakdown.
📈 Rounding Bottom: A Slow Transition from Bearish to Bullish
Formation: Price curves upwards, showing gradual accumulation by buyers.
Breakout Signal: Once the price crosses the resistance, expect a long-term uptrend.
Example: Bata India had both a rounding bottom and rounding top, confirming the pattern’s reliability.
📌 Important Rules for Rounding Patterns:
Measure the depth of the curve—this will be your target after the breakout.
Sideways consolidation should be short (not more than 40% of the rounding time).
🔹 Lesson: Rounding patterns take time but provide high-probability trades when confirmed.
🏆 Cup and Handle: The Classic Bullish Continuation Pattern
📌 What is the Cup and Handle?
The cup is a rounding bottom shape.
The handle is a small consolidation before the breakout.
Breakout happens when price crosses the neckline.
📌 Trading Cup and Handle Patterns:
Entry: When the price breaks out of the handle.
Stop Loss: Below the handle's low.
Target: Measure the depth of the cup and project it upwards.
📌 Live Market Example:
Bank of Baroda formed a perfect cup and handle.
Breakout confirmed a bullish move.
🔹 Lesson: Handles must always be on the right side of the cup! Never on the left.
🚩 Flags & Pennants: Powerful Short-Term Continuation Patterns
📌 What Are Flags & Pennants?
Flags: Rectangular consolidation after a strong move.
Pennants: Small symmetrical triangles after a strong move.
Both signal continuation of the existing trend.
📌 How to Trade Flags & Pennants:
Identify a strong price movement (pole).
Look for a flag (rectangle) or pennant (small triangle).
Wait for breakout confirmation.
Set target = length of the flagpole.
📌 Live Market Example:
Nifty 15-Min Chart: Flag formation identified, predicted 835 target, which was achieved the next day.
SIPLA: Forming a flag, expected to break out on Monday.
📌 Key Difference Between Pennants & Symmetrical Triangles:
Pennants always have a pole (strong price movement before formation).
Symmetrical triangles can form in any market condition.
🔹 Lesson: Flags & pennants provide excellent short-term trade setups with high reward-to-risk ratios.
🏁 Final Thoughts Before the Next Section
📌 Patterns Learned So Far: ✅ Double Top, Double Bottom ✅ Triple Top, Triple Bottom ✅ Head & Shoulders (Normal and Inverse) ✅ Triangles (Symmetrical, Ascending, Descending) ✅ Wedges (Rising & Falling) ✅ Rounding Top, Rounding Bottom ✅ Cup and Handle ✅ Flags & Pennants
📌 How to Apply This Knowledge:
Master these patterns through real market examples.
Use ATR-based stop-loss and targets for consistency.
Combine patterns with volume analysis for better confirmation.
🔹 What’s Next?
Advanced Trade Execution Strategies.
Live Market Analysis & More Examples.
Stay tuned for the next section! 🚀📊
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