Technical Analysis: Federal Bank
This analysis examines Federal Bank's stock, highlighting a bullish engulfing pattern on the 4-hour chart. We'll explore the stop loss, current market price (CMP), and potential target prices, providing insights for experienced traders.
RD
by RA ALOK DAIYA
Report as on 8th Aug 2024
call closed with 7.27% Returnas on 13th Aug 2024
Understanding Bullish Engulfing Patterns
A bullish engulfing pattern is a powerful reversal signal. It occurs when a small bearish candle is followed by a larger bullish candle. This pattern suggests a potential uptrend.
On Federal Bank's 4-hour chart, this pattern indicates increased buying pressure. It may signal the end of a downtrend.
Current Market Price (CMP) Analysis
Federal Bank's current market price stands at 192.5. This price point serves as a reference for our analysis. It's crucial to monitor how the stock moves from this level.
The CMP is above the identified stop loss, suggesting a positive sentiment. However, traders should remain cautious of market volatility.
Stop Loss Strategy (EOD Basis)
Stop Loss Level
The recommended stop loss is set at 188. This level is crucial for risk management.
Risk Mitigation
A stop loss helps limit potential losses if the stock moves against expectations.
Volatility Buffer
The 4.5 point buffer between CMP and stop loss accounts for normal price fluctuations.
Target Price Analysis
1
First Target: 198
This represents a 2.86% increase from the CMP. It's a conservative target for short-term traders.
2
Second Target: 204
A 5.97% rise from CMP. This target is suitable for medium-term investors.
3
Third Target: 210
The most ambitious target, offering a potential 9.09% gain. It's for long-term holders.
Risk-Reward Ratio
The risk-reward ratio is favorable. The potential upside (up to 17.5 points) significantly outweighs the downside risk (4.5 points).
This setup offers a positive risk-reward ratio of approximately 1:3.89. It's an attractive proposition for risk-conscious traders.
Volume Analysis
Volume often confirms price action. Traders should look for increasing volume on up days. This would support the bullish engulfing pattern's implications.
Declining volume on down days would further reinforce the bullish outlook.
Additional Considerations
- Monitor broader market trends and banking sector performance.
- Keep an eye on Federal Bank's upcoming quarterly results.
- Consider using trailing stops to protect profits as the stock potentially moves higher.
- Always adhere to personal risk management guidelines and position sizing rules.