Chart Check: LIC breaks out from inverse head & shoulder pattern; what should investors do?
Life Insurance Corporation of India (LIC), part of the life insurance sector, didn’t have a good run post its listing in May 2022 but a recent breakout from an inverse head & shoulder pattern as well as its falling trendline since its IPO gives an indication that bulls could take control. The stock fell more than 30% from its listing day high. LIC listed on bourses on 17th May 2022 and made a high of Rs 920.
The stock closed at Rs 622 on 18th July 2023 which translates into a fall of nearly 33%. However, the stock picked up pace in the last few months. It rose marginally in the last month but saw a 14% jump in the last 3 months.
The life insurance player is trading above the neckline of the falling trendline breakout which was placed at Rs 617 and the inverse Head and Shoulder pattern was placed around Rs 620. The stock closed at Rs 622 on 18th July 2023. The stock is trading above both the breakout levels which happened in June 2023.
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 (head – marked as H) significantly lower than the other two bottoms (left and right shoulders – marked as S). Also Read In terms of price action, the stock is trading above 5,10,30,50,100 and 200-DMA on the daily charts, which is a positive sign for the bulls.
The daily Relative Strength Index (RSI) is placed at 54.9. RSI below 30 is oversold and above 70 is considered overbought, Trendlyne data showed. LIC is trading in a lower top, and lower bottom formation since its IPO.
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