BHEL Stock Break Long-term Trend Reversal Pattern: Do You Own it?

On the last day of the weekly session, Nifty opened gap-up because of the strong US markets rally and filled the gap. That’s when the bulls came into action and bounced back from the day’s low to recover from the fall.  

The stock Bharat Heavy Electricals Ltd is an integrated power plant equipment manufacturer engaged in the design, engineering, manufacture, erection, testing, commissioning and servicing of a wide range of products and services for the core sectors of the economy, viz. Power, transmission, Industry, transportation, renewable energy, Oil & Gas and Defence. It is the flagship engineering and manufacturing company of India owned and controlled by the Govt of India. 

Technically on the monthly chart, it formed trend reversal pattern named “Inverted Head and Shoulder” kind of formation in which line drawn from the high of April 2017 (Rs 121.85) and October 2021 (Rs 80.35) will act as the neckline of this pattern. It registered a breakout of this pattern in November 2022 as it closed above this neckline and rallied higher. The minimum possible targets of this pattern will be around Rs 130 which is more than 70% higher than the neckline. 

After such a long-term breakout, it witnessed some throwback rally and again tested the neckline support level. It consolidated for almost 7 weeks in the range of Rs 91.55 on the higher side and Rs 66.30 on the lower side. If we draw the trendline from the highs of the first week of December 2022 (Rs 91.55) and the first week of May 2023 (Rs 87.95) we’ll get the trendline of continuation pattern and weekly close above Rs 88 will confirm the breakout of this pattern. The minimum possible targets of this pattern will be around Rs 115 which is more than 35% higher than the current level. 

On the daily chart if we draw the trendline from the highs of May 18, 2023 (Rs 83.60) and May 30, 2023 (Rs 83.90) we’ll get the neckline of trend reversal pattern. Close above Rs 84 on a daily basis will register the breakout and the minimum possible targets of this pattern will be around Rs 91 which is more than 8% from the current level. 

Interestingly, it is now trading around Rs 83.30 which is near to breakout level on the daily chart and targets of this breakout will trigger the weekly breakout level thus it needed to be on the radar for the next few sessions.