Since listing, the share price of Life Insurance Corporation Of India (NS:) has disappointed investors big time. The expectations with the LIC IPO were quite high and it was the most buzzing IPOs of its time. Despite being the largest insurer in India, the IPO proved to be a wealth destructor for investors.
On a listing day on 17 May 2022, the stock opened trading at INR 872 and made a high of INR 918.95. That was the highest point it traveled to till now. Meaning, that the opening day’s high is the highest high it touched till now and has only been trending lower since then. Every minor rally in between the fall proved to be a selling opportunity for investors who wanted to cut their losses short.
From mid-June 2022 to mid-July 2022, there was a surge in the stock price which led investors to think that the downtrend is over, but eventually, that rally also faded and the stock again turned lower. However, now some interesting developments are being formed on the daily/weekly chart of LIC shares.
Image Description: Weekly chart of LIC shares
Image Source: Investing.com
As the stock resumed its downtrend after the mid-July 2022 rally, it fell close to the previous low, marked prior to the rally. Till now the stock has not been able to breach that low which is a positive sign and indicates investors are getting active around these lower levels. The biggest evidence of this increasing demand was seen today, as the stock rallied 2.77% to INR 670.25, printing a big bullish candle on the chart. The demand from these levels is important because these were the same levels that previously stopped the stock from falling further. Hence the current demand from the same levels has developed the formation of a double bottom pattern that resembles “W”.
This is a bottom reversal chart pattern and is known to turn a prior downtrend to an impending uptrend. The probability of a successful reversal of this pattern increases if the formation takes place near a noticeable bottom. In the case of LIC shares, it is formed around the all-time low which is highly positive. The confirmation of this pattern comes after it breaks above the resistance peak between the two troughs, INR 725 in the case of LIC.
However, a reversal signal is clearly evident from the bottom, which might entice high-risk traders to make a pre-mature entry as the risk reduces significantly from these levels, compared to entering at the breakout level. As long as the stock is trading above INR 650, there are high chances of a reversal from here. Above the breakout level of INR 725, the target of this pattern comes to around INR 800.
