Can Fin Homes – Big Correction Time?

Can Fin Homes – Big Correction Time?

Can Fin Homes shares showing signs of reversal with a“doji” in monthly chart and formation of “descending triangle” in weekly chart

canfin doji
Can Fin Home Technical Monthly Chart

Can Fin Homes,established in 1987 is one of the top players in the country’s housing finance sector sponsored by & promoted by Canara Bank

The stock price had a dream run of growing up by 12 x in the last three years, raising from 100 odd levels in 2013 to 1200 levels in 2016

Despite the poor show by its sponsor (i.e. Canara Bank) in the last three years, this stock managed its stellar ride and showed no signs of switching to reverse gear even in the worst of times which the market has witnessed in early ‘2016

The stock hit the all-time of Rs. 1324 in Apr’16; since then, the stock price is consolidating and trading in the ranges for the last couple of months

During the month of May, the stock formed ‘doji’ in the monthly chart signifying the indecisiveness among the investors as whether the Bull Run will continue or not

“The doji candlestick indicates equality and/or indecision between bulls and bears. It is quite often found at the bottom and top of trends and is considered as a sign of possible reversal of price direction

It didn’t end up there – the stock could be seen forming ‘descending triangle’ in the weekly chart with Rs.1135 as its base

Descending Triangle Formation
Can Fin Home Weekly Chart

Though the descending triangle is a continuation pattern and usually is found in the downtrends, it’s not uncommon for the descending triangle to form at the market tops. It doesn’t matter much during which trend descending triangle forms – it symbolises only one thing i.e. the stock price will undergo major trend reversal to the downside once the base is pierced

What’s next?

If Can Fin Home stock price breaks the base at 1135 solidly, the minimum price one can expect the stock to fall is to Rs.950 (calculated by measuring the height of the pattern at the triangle’s widest point and project that vertical distance from the base or breaking point)

Since there’s no strong support spotted around 950 levels, the stock may pursue its downward journey and find a halt only at Rs. 844.

Rs.844 levels offered huge support in early 2016 when most of the market participants plummeted due to global sell off  (co-incidentally it’s also the 61.8 Fibonacci retracement line of stock upward move from 77 to 1320 levels)

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