Chart Check: IndusInd Bank forms Head & shoulder pattern; short for Rs 650 target in 1-2 months, says Kapil Shah

Bank, part of the private sector banking space, has fallen over 30 per cent from its October 2021 highs firmly placing the stock in a bear grip and chart patterns suggest that the pressure is likely to continue.

The stock with a market capitalisation of more than Rs 63,000 crore hit a 52-week high of Rs 1241 on 28 October 2021 but failed to hold on to the momentum. It closed at Rs 806 on 24 June 2022 which translates into a downside of over 35 per cent.

The private sector bank broke below the crucial support above the Rs 800 levels earlier in the month of June 2022 and formed a Head & Shoulder type of pattern on the weekly charts.

Head and shoulders is one of the many popular chart patterns widely used by investors and traders to determine market trend. This pattern occurs on the chart when the stock/index price hits its peak and declines thereafter. Also Read

The stock broke below the neckline of the pattern earlier in June 2022 but stock price action seen in the last few sessions pushed the price above Rs 800 after hitting a 52-week low of Rs 763 on 23 June 2022.

But chart structure still remains weak and the short-term traders can look for shorting opportunities in the stock for a target of Rs 650 on the downside, suggest experts.

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On the price front, the stock is trading below 20, 30, 50, 100 and 200 DMA but above 5 and 10-DMA.

MACD is below its signal and center line, this is a strong bearish indicator. The Relative Strength Index (RSI) is at 36.4. RSI below 30 is considered oversold and above 70 is considered overbought, Trendlyne data showed.

From higher time frame to lower time frame,

’s stock chart structure harps on the same string and tilts towards negative development.

“Stock is reacting from the quarterly chart resistance band and its ripple effect can be seen on the lower time frame chart. On the weekly chart, stocks have formed a Head & Shoulder pattern for the duration of 82 weeks,” Kapil Shah, Technical Analyst, Emkay Global Financial Services Limited and Trainer at FinLearn Academy, said.

“Patterns that take a larger time to form are considered to be more powerful. In an ongoing week, Stock has breached the neckline or support line which confirms the negative implication of the pattern,” he added.

From the Oscillator perspective, MACD has given a negative crossover in the negative zone which is a bearish continuation sign.

Based on the above rationale, the stock offers a short opportunity in the zone of Rs 787 to Rs 800 with stop loss at Rs 835 level on a closing basis, recommends Shah.

“On the downside, Stock has immediate support at the Rs 650 level. With this setup, stock offers a risk-reward ratio of 1:3 and the duration of this view can be around 1 to 2 months,” he added.

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

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