This insurance company is experiencing a rounding bottom pattern; should you invest?

Are you looking for stocks experiencing a buillish trend reversal? Check out this article.

There are several patterns that may be used to predict a trend reversal towards the bottom of a continuing downturn. A Rounding Bottom chart pattern, on the other hand, is one of the finest for detecting a trend reversal, from bearish to bullish.  

At the bottom, it appears to be a smooth slope, suggesting a gradual transfer in power from the bears to the bulls. The lower this pattern appears on the chart, the greater the likelihood of recovery. 

General Insurance Corporation of India (GICRE) is one stock that is regaining its upward momentum after a long period of decline. In fact, the whole insurance industry is booming right now. Consider New India Assurance Company Ltd., which is up 14.75 per cent in one month, Life Insurance Corporation of India, which is up more than 14 per cent so far this month, and so on. 

Image: Weekly chart of General Insurance Corporation of India 

Looking at the GICRE chart, the stock is forming a lovely rounding bottom pattern on both the daily and weekly charts. It had its market debut in October 2017, following which the stock saw a one-way drop. During the Covid-19 fall, the stock fell from a listing price of Rs 425 to a low of Rs 81.5. 

From there, it attempted to rebound and produced a solid bounce up to around Rs 240, but selling pressure soon set in, and the stock began its voyage south again, this time plummeting to a low of Rs 105 in June of this year. But the tide appears to be shifting, and the stock has altered gears once more in an attempt to rise to greater swing highs. 

What's new this time is the smooth rounded bottom base, which was lacking the past time. These types of bases boost the likelihood of the stock staging a successful rebound. 

Because the level of Rs 190 is a strong supply zone, the stock may have difficulty clearing it. However, if this level is breached, the stock would face immediate resistance around Rs 275.