Bata India exhibits Dark Cloud Cover pattern

The stock of Bata India Limited has formed a Dark Cloud Cover candlestick pattern on the daily time frame. The stock had given downward sloping trendline breakout at Rs. 1465 as on weekend of August 16, 2019 and thereafter the stock saw almost 17.96 per cent upward move.

The Dark Cloud Cover is a bearish reversal candlestick pattern, which usually occurs when a bearish candle on Day 2 closes below the middle of Day 1’s candle. In addition, price gaps up on Day 2 only to fill the gap and closes significantly into the gains made by Day 1’s bullish candle. The rejection of the gap up is a bearish sign itself, but the retracement into the gains of the previous day's upmove adds even more bearish sentiment.

Going ahead, if the stock slips below the Monday’s sessions low of Rs. 1713.10 and trades convincingly below this level, then there is high probability that Monday’s high point of Rs. 1769.95 would become a temporary top for the stock. The 14-period daily RSI cooled off after touching the 80 zone and, at present, its reading is 70.65. The RSI is trading below its 9-day average and it is in falling mode, which indicates further downside momentum. The stochastic has also given negative crossover which suggests a pause in the uptrend. Moreover, there has been a negative divergence between the daily stochastic and the stock price movement, which suggests limited upside.

On Monday, the stock of Bata India Limited closed at Rs. 1721 per share, dipped by 1.89 per cent. The stock opened at Rs. 1767 per share and hit an intraday high of Rs. 1769.95 and a low of Rs. 1713.10 per share on NSE.