Check out the stocks with bullish pattern by candlestick strength

by 5paisa Research Team Last Updated: Dec 16, 2022 - 04:31 pm 41.9k Views

When Japanese rice trader Munehisa Honma was making tons of money in Osaka in the 18th century he wouldn’t have imagined that nearly three centuries later, the method devised or at least attributed to him—candlestick charts or Japanese candlestick charts—would become the staple of studying patterns in the stock and currency market.

Investors who bank on technical analysis, or patterns in the price and volume movements of stocks, typically use candlestick charts or use it along with other parameters to predict price movements of stocks in the future.

In simple terms, the candlestick captures the opening and closing price along with highs and lows of a stock. Analysts study patterns of these candlesticks to pick stocks.

One of the strategies that are used by technical analysts is to look at stocks with good aggregate candlestick strength. This, in turn, is the value one derives from the net of bullish over bearish candlestick indicators.

If the number is in the positive quadrant and has a higher value it indicates a bullish pattern, and vice versa if the number is on the negative side.

If we apply this to the broader list of stocks, we get a set of around 136 companies that have a good aggregate candlestick strength of 2 or more, showing bullish trends. A lot of these stocks are from the small and micro-cap list.

We also factored out from this set stocks with price under Rs 20 to filter a chunk of penny stocks.

Looking at the picture after this exercise we still have over 100 stocks that could be of interest to traders.

In this set, some of the known companies include India’s top healthcare firm Apollo Hospitals, drugmaker Dr Reddy's Labs, Persistent Systems, Oracle Financial, Elantas Beck India, Mphasis, Eicher Motors, Privi Speciality Chemicals, Policybazaar parent PB Fintech, Carborundum Universal, Somany Ceramics, TCNS Clothing and TVS Motor Company.

But this is not the end. Various other stocks also are in the bullish zone by the candlestick strength measurement. These include CARE Ratings, Balrampur Chini, Gokaldas Exports, HPCL, IIFL Finance, India Cements, Suryoday Small Finance Bank, Burger King India, Ujjivan Financial, Bombay Dyeing, Shriram Asset Management and NALCO.

We also extended the exercise to pick a smaller subset within this group having a strength of 3 or 4, even as the bulk of the others carry a figure of 2.

Premier Explosives is the only one among the group with a value of 4. Some known names among the others that are showing a value of 3 are Ultramarine & Pigment, and state-run companies NALCO and SJVN.

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