CESC forms a double bottom pattern

The stock of CESC Limited has formed reversal dark cloud cover candlestick pattern as on November 05, 2019 and thereafter, entered into a downtrend and recorded series of lower high and low. On December 09, 2019, the stock had formed a swing low of Rs 710, where it has formed a spinning bottom like candlestick pattern and, thereafter, the stock prices rebounded to touch the level of Rs 760.30. However, the stock failed to hold onto the higher levels and the price attempted to return to the previous trend but the bears were not able to push prices much lower and the stock registered an almost identical bottom on January 8, 2020. This resulted in the formation of Adam and Adam double bottom pattern.

On Friday, the stock has given a neckline breakout of the double bottom pattern. This breakout was confirmed by the above 50-day average volumes. With this pattern breakout, the stock has also managed to close above their long-term moving averages that are, 100-day EMA and 200-day EMA. The 14-period daily RSI is currently quoting at 62.68 and it is in bullish zone. The daily stochastic oscillator is suggesting some bullish strength as well since per cent K is above the per cent D. Moreover, a positive divergence was also spotted at the daily time frame on the RSI, which indicates limited downside. Positive divergence occurs when the price is making a lower low, while the RSI forms a higher low.

Going ahead, we expect the bias to remain positive as long as the stock sustains above Friday’s low of Rs 746.55 level. On the higher side, the level of Rs 780, followed by Rs 810, would be seen as the next resistance zone for the stock.
 
On Friday, the stock of CESC closed at Rs 772 per share, up by 3.44 per cent. The stock had opened at Rs 747 per share and hit an intraday high of Rs 780 and a low of Rs 746.55 per share on NSE.