Biocon forms double bottom pattern

The stock of Biocon Limited had given a breakdown of its Symmetrical triangle pattern as on April 30, 2019 and thereafter, had marked a sequence of lower tops and lower bottoms. As on weekend of August 23, 2019, the stock formed a swing low of Rs. 211.05 and then formed a bullish reversal Hammer candlestick pattern. Thereafter, the stock prices rebounded to touch the level of Rs. 238.80. However, the stock could not hold on to higher levels and all attempts to return to the previous trend. But the bears were not able to push the prices much lower and the stock registered an almost identical bottom on the weekend of September 27, 2019. This resulted in the formation of an Adam and Adam double-bottom pattern.

On Thursday, the stock has given a breakout above the neckline of double bottom pattern. This breakout was confirmed by the above 50-day average volumes. Additionally, the stock had formed opening bullish Marubozu candle on breakout day, which adds strength to the breakout. The opening bullish Marubozu candle has no shadow extending from the open price end of the body. It should be noted that opening bullish Marubozu candle indicates extreme bullishness.

Among the momentum indicators, the 14-period daily RSI is currently quoting at 66.95 and it has recently given downward sloping trendline breakout. The MACD line is above the zero line and the signal line. The increasing histogram is suggesting the momentum in this stock is building up. Moreover, it has also managed to close above the Ichimoku cloud and the upper Bollinger band, suggesting bullish momentum.

Going ahead, we expect the bias to remain positive as long as the stock sustains above the Thursday’s low of Rs. 233 level. On the higher side, the level of Rs. 251, followed by Rs. 265, would be seen as the next resistance zone for the stock.

On Friday, the stock of Biocon Ltd closed at Rs. 247.50 per share, up by 3.04 per cent. The stock had opened at Rs. 242.40 per share and hit an intraday high of Rs. 250.20 and a low of Rs. 239.50 per share on BSE.