These stocks have formed a bullish pattern by candlestick strength
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 markets.
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 stock 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 the bullish pattern and vice versa for the number being in the negative side.
If we apply this to the broader list of stocks, we get a set of around 110 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 factor out from this set stocks with prices under Rs 20 to filter a chunk of penny stocks.
Looking at the picture after this exercise we get 58 stocks that could be of interest to traders.
In this set, some of the known companies include Garware Technical, Ravalgaon Sugar, GM Breweries, VIP Industries, Century Enka, JK Lakshmi Cement, Repco Home Finance, Greenply Industries, Mafatlal Industries, Universal Cables, Lovable Lingerie, Lloyds Metals and Indiabulls Real Estate.
We also extend the exercise to pick a smaller subset within this group having a strength of 3, even as the bulk of the others carry a figure of 2. This list has mostly smaller companies such as Jay Ushin, Salasar Exteriors, Stanrose Mafatlal, Sprayking Agro and Envair Electrodyne.
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