Grasim, Indigo Paints among stocks showing bullish pattern by candlesticks

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

Candlestick charts, or Japanese candlestick charts, were devised by – or are attributed to – Munehisa Honma, a Japanese rice trader in Osaka in the 18th century.

These charts have become the staple of studying patterns in the stock and currency market. 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 135 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 but if an investor would like to stick to the bigger names one can stick to the Nifty 500 pack to filter the candidates.

In this set, some of the known companies include Grasim, Bajaj Electricals, Equitas Holdings, CG Power, AIA Engineering, Dalmia Bharat, Indigo Paints, UTI Asset Management, Poonawalla Fincorp, Chambal Fertilisers, Shipping Corporation.

If we look beyond the Nifty 500, some other names in the club include Dhanuka Agritech, Novartis India, Maharashtra Seamless, Healthcare Global, Zuari Agro and Indostar Capital.

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

This list has mostly smaller companies such as SRG Housing Finance, India Motors Parts, James Warren Tea, Sagar Cements and Hercules Hoists.