DLF forms Three Inside Down pattern

The stock of DLF Limited has formed a Three Inside Down candlestick pattern on daily timeframe. This pattern represents a confirmation of the Bearish Harami Pattern, which indicates that the forecast is successful.

In this pattern, first candle is a long bullish candle, which closes near its high, the second one is a small bearish candle, which gaps away from the first candle while closing inside the body of it, thus, creating a harami pattern. Third candle exceeds the lows of the first two candles.

Along with this bearish formation, the stock after a span of almost over two months has managed to successfully close below its crucial short-term moving averages, i.e. 20-day EMA. Among the momentum indicators, the 14-period daily RSI, cooled off after touching 75-80 zone and at present its reading is 47.14. The RSI is trading below its 9-day average and it is in falling mode, which indicates further downside momentum. The weekly and daily stochastic oscillator is also suggesting some bearish momentum as %K is below the %D. Moreover, a negative divergence is also spotted on the daily time frame on the RSI, which indicates limited upside.

In the near term, the zone of Rs 234-235 is likely to act as major resistance for the stock. While on the downside, any sustainable move below Monday’s low would result in further correction, up to the level of Rs 214, and followed by Rs 209.

On Monday, the stock of DLF Limited closed at Rs 221.20 per share, down by 3.24 per cent. The stock opened at Rs 227 per share and hit an intraday high of Rs 227.55 and a low of Rs 220.15 per share on the NSE.